Tax Partner Pro – Your Q answered July 24

We have been supporting our Tax Partner Pro members via our email and call back service. Here’s an overview of some of the more recent questions we have answered during July 24

Q

My client has the following income  – UK State pension / uk self employment / uk rental income

This will all continue – however he plans to live for 7 months a year at his Portugal home (he has a permanent residence permit) and then return to the UK for the remaining 5 months of the year.

He will have no income generated in Portugal.

Broadly once this happens does he continue to complete his UK tax return as normal and pay UK tax?

Then have an obligation to declare all this income in Portugal and pay no further tax due to double tax treaty.

A

Its difficult to determine whether he’d become non-uk resident from the information provided as it’s largely based on number of days in the UK / ties to the UK etc.

If someone is spending 5 months of the year in the UK, more often than not they will remain UK resident.

As a result, the answer is yes, he would continue to declare his income in the UK and pay tax here.

The double tax treaty between the UK and Portugal will dictate which country holds the primary taxing rights and which therefore must give relief. I’d imagine if the sources of income are UK based, the UK will retain those taxing rights and Portugal will deduct UK tax suffered from their calculations.

Q

A client of mine is working with a US company who will only work with her as a sole trader.

She maybe wants to set up a limited company (she will be the sole director) to work with other clients and she is asking me if she can invoice the sole trader to get the funds in to the limited company.

Are you able to confirm?

A

I would expect that there will be withholding tax in the US in which case it will have to stay as sole trader income, otherwise there won’t be any relief for the tax withheld.

You are correct that there isn’t really anything commercial to invoice – the service has already been provided by the client personally.

If there isn’t any withholding tax, you could say that the client was acting “as agent” for the limited company then it could be regarded as the company’s income.

Q

I have a query about registering for vat in the EU.

A client provides medical writing services, clients send her instructions on what they need written up, e.g. a scientific manuscript or an abstract for presenting at a science conference. She has clients in France and Ireland, currently at low levels of turnover (£5k and £2k) but may increase significantly. Does she have any EU VAT responsibilities?

A

If it’s B2B, the place of supply will be deemed to be where the customer belongs. If this is the EU then the customer will account for the relevant VAT under the reverse charge mechanism. When goods or services are supplied in other EU countries, the Reverse charge moves the responsibility for recording the VAT on the transaction from the seller to the buyer.

That way, it eliminates or reduces the obligation for sellers to VAT register in the country where the supply is made.

Q

I have a client who has a holding company. They haven’t been registered with HMRC for corporation tax so far as there has been no trading. But at some point they started paying dividends to the holding company from a subsidiary. Is this classified as investment income and should they have contacted HMRC to say they are active for corporation tax purposes now or can they still be exempt from filing corporation tax returns? There is no other transactions in the holding company.

They have also paid the dividends directly to the shareholder of the holding company from the subsidiary (the holding company has no bank account). I guess this is ok as long as they have all the evidence of the dividends going via petty cash?

A

If all the holding company is doing is passing through dividends to the shareholders then I can’t see that would affect the overall position as regards treating it as dormant from HMRC’s point of view.  If the company starts to build up a cash balance and earns interest then of course that changes the dynamic…

In terms of paying direct then I’d say as long as the right book entries go through then again this is not an issue.  I’d suggest though making sure the right dividend paperwork is also in place – resolutions etc – again just to evidence the payment of the dividend first from sub to Holdco and then from Holdco to the shareholders…

Next Steps

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