atom

Dear HMRC Admin, you write that: "If the services are non digital in nature then please see the guidance here: B2C services of a professional, technical, financial, intellectual or other intangible nature supplied to customers outside the UK" That page says that such services (intellectual, non-digital) "are supplied where your customer belongs and so are outside the scope of UK VAT". Is this notion from UK legislation or EU legislation? I ask because there might be a mismatch between the two legislations where such services are deemed supplied where the customer belongs by UK law but where the supplier belongs by EU VAT law (the standard B2C rule). In this case would one need to register for MOSS and pay EU VAT? Thank you.

Dear HMRC, thank you for your reply. One more simpler question – does a loan from a shareholder (not director) of a ltd company for the purposes of helping with startup costs need to be at arm's length/market conditions? Is it a benefit in kind for the company if it's 0 interest? Thank you.

Dear HMRC Admin, thank you for your reply, I have referred to the guidance in both "Residence, domicile and the remittance basis: RDR1" and "Remittance basis 2024 (HS264)". What I couldn't find is whether the use of a UK private Ltd trading company to receive the foreign dividend "stains" the dividend which becomes UK income or whether the dividend (which becomes income for the ultimate owner upon declaring it) remains foreign because it was produced abroad. Thank you.

Dear HMRC Admins, I've asked this question in the personal tax forum and they replied that they are not able to assist on matters of business tax (which is half of my question) so I thought it would be beneficial to ask here, too. Tradeco GmbH makes a profit in Germany with no permanent establishment in, and no ties to, the UK. It distributes these profits, after all relevant German taxes, to its shareholders. One of these shareholders is Holdco Ltd, incorporated in the UK, which owns 80% of stock and voting rights in Tradeco GmbH. Holdco Ltd is wholly owned by a UK resident non-domiciled natural person who claims the remittance basis. The personal tax forum Admins wrote that: (1) "All sources of UK income and capital gains, remain taxable in the UK". The trading income of DE Tradeco GmbH is clearly not UK income. If a dividend is distributed to UK Holdco Ltd and then in turn distributed to the non-dom shareholder of Holdco on a foreign bank account, is that considered UK income because it is paid by a UK company? Even if the holding company is merely a "pass-through" entity and therefore transparent? (2) "The remittance basis applies only to foreign sources of income / capital gains not remitted to the UK". I think in this case there would be no remission if the dividend is paid to a foreign bank account, correct? The issue then remains of whether the dividend from the holding company to the natural person was UK income for the natural person in the first place, even if it was "produced" abroad and the holding company is "pass-through"/"transparent". My question is whether the mere presence of a non-trading UK-incorporated and UK-resident holding "stains" the foreign dividend and turns it into UK income when it is distributed to the resident non-domiciled or whether the UK holding company is transparent for this purpose and therefore the dividends remains foreign-earned income for the person and is therefore not subject to tax in the UK as long as it's not remitted to the UK. Thank you for your support.

Thank you for your reply. You are correct in saying that this is a difficult question since it covers both corporation and personal tax. However, I'd like to focus on the personal tax aspect of the questions under the remittance basis. A UK holding company distributes a dividend arising abroad (from the trade/business of a foreign entity that it owns) to a UK resident non-domiciled on a personal, foreign bank account. In terms of the natural person's personal tax, is this UK income or not under the remittance basis? You kindly write that "It would appear that the UK company is in receipt of foreign dividends and would share those foreign dividends with the share holders, who would declare as foreign dividends and not UK dividends. Dividends arising from the UK company and paid to shareholders would be classed as UK shares and dividends." I'm afraid it's not very clear what you mean. Do you mean that if the trading company is foreign, the dividends are foreign income despite the holding company being UK resident? And that if the trading company is UK resident, the dividend personal income is UK income? If so, the UK holding company is transparent for tax purposes and the income remains foreign if it's initially produced abroad? Thank you again for your help.

Dear HMRC Admin, thank you for your kind reply and for providing guidance. Let me reassure you that I have every intention of engaging with an accountant. Even after referring to the literature you have pointed to, I still do not understand whether: (1) directors' loans are also available to shareholders (besides directors of the company) to help with startup costs (2) on pre incorporation costs: excluding capital expenses, the company can claim back certain "pre-trading expenditure". Does pre-trading expenditure include non-capital pre-incorporation costs? If such costs were born by directors, a "non-trading debit" would be created within the scope of CFM32100 - Loan relationships: non-trading deficits: pre-trading expenditure. These are applicable pre-trading, but are they also applicable pre-incorporation? Does that automatically create a pre-trading, pre-incorporation directors' loan? Thank you again for the support.

Dear HMRC Admin, thank you for your kind reply. I originally submitted the question as a scenario because I thought it could help me better understand the mechanisms described. Let me rephrase it in a way that is adherent to a state of affairs and therefore not a scenario. I was also unfortunately not able to find suitable guidance in RDR1, despite repeatedly before posting this question. Tradeco GmbH makes a profit in Germany with no permanent establishment in, and no ties to, the UK. It distributes these profits, after all relevant German taxes, to its shareholders. One of these shareholders is Holdco Ltd, incorporated in the UK, which owns 80% of stock and voting rights in Tradeco GmbH. Holdco Ltd is wholly owned by a UK resident non-domiciled natural person. If you deem the above to still be a "scenario" you are unable to reply to, please disregard it for the purposes of my question and only refer to what follows. You write that: (1) "All sources of UK income and capital gains, remain taxable in the UK". The trading income of DE Tradeco GmbH is clearly not UK income. If a dividend is distributed to UK Holdco Ltd and then in turn distributed to the non-dom shareholder of Holdco on a foreign bank account, is that considered UK income because it is paid by a UK company? Even if the holding company is merely a "pass-through" entity and therefore transparent? (2) "The remittance basis applies only to foreign sources of income / capital gains not remitted to the UK". I think in this case there would be no remission if the dividend is paid to a foreign bank account, correct? The issue then remains of whether the dividend from the holding company to the natural person was UK income for the natural person in the first place, even if it was "produced" abroad and the holding company is "pass-through"/"transparent". Thank you for your support.

Hi there, I have a few questions regarding the notion of directors' loans. All questions are about a director loaning money to a close LTD company incorporated in England and Wales. (1) Is there anything specific I should write in the bank transfer description/reference for the directors' loan, in case a director is funding the company with a zero interest loan, (a) in the bank transfer from the director to the company and (b) from the company back to the director? (2) Are directors' loans aimed at funding the company only available to directors of a LTD company or also to its shareholders? If not specifically available to shareholders, is a shareholder lending money to his/her company considered the same as a third party lending to the company? Is there any difference if the shareholder holds an interest in a trading company to which he is lending through the use of a holding company? (3) Directors' loans can be used to help with startup costs as an alternative to a share capital subscription. However, some startup costs could be born by the prospective director of a company that is still to be created, for the purposes of starting the company itself, before the company is incorporated formally. If a director personally bears costs that are logically and reasonably connected to the activity that the soon-to-be-incorporated LTD company will carry out, and this happens reasonably close to the date of incorporation, can these payments be considered a director's loan even if the company still doesn't exist? Examples could be the cost of website hosting, email, accounting/legal advice to set up the company and any reasonable cost that a director would incur as a function of his role. The need for this might arise, for instance and among other things, if for any reason the incorporation of the company is delayed but some costs have already been incurred. (4) Is a zero interest directors' loan from the director to the company (for startup costs) legitimate since it doesn't follow the usual "at arm's length" requirement for this kind of operation? Do you confirm it is not a benefit-in-kind (or similar) for the company? (5) Assume a director loaning money to his company wants to relieve the company (and therefore also any other director) from the risk of taking on the loan itself. He decides to write a note to the company (or a simple contract) where he agrees that if the company cannot at any point in good faith and reasonably repay the loan, any and all claims from the director towards the company and in relation to that loan become void. In other words he agrees that the loan is repayable only if and when the company can afford it. Is this (a) legitimate, and (b) does it have any implications as far as HMRC is concerned? Thanks a lot for your help

I'd like to understand the tax treatment for a certain type of personal income under the current non-dom (remittance basis) rules. Specifically whether (1) personal income in the form of a dividend arising from a UK trading company owned by an EU holding (non-trading) company, in turn owned by the non-domiciled UK resident, is considered foreign or UK income; and whether (2) personal income in the form of a dividend arising from a foreign (EU) trading company owned by a UK holding (non-trading) company, in turn owned by the non-domiciled UK resident would be considered UK or foreign income. To clarify, these are two mirror situations and in each case the dividend is distributed from the holding company which owns a majority stake (50% or more) of the trading company. Consider the holding company as a personal private limited company (so the new QAHC provisions do not apply). Assume all dividends to be paid to a non-UK bank account (therefore non-remitted if they are non-UK income in the first place). Please assume the shareholding in the UK trading company in case (1) to predate the remittance basis election by the taxpayer, so BIR would not apply (and is outside the scope of the question). In case (1) I would assume the payment to be UK income because even if the dividend is distributed from an overseas company to an overseas account, the value produced by the company is UK-related and the company profited from the UK economy. In case (2) it would seem odd to treat it as UK income given that the holding company does not carry out a business and does therefore not generate any income per se. Finally, in general terms what is the normative and policy basis for defining UK income under the remittance basis? Finally, is there any difference if the shareholding in the trading company is qualified vs unqualified, and what is the relevant threshold? Thank you for your help.