Tax for UK Limited Company

Take a read through this it covers taxes in practically all situations between Spain and U.K.
https://assets.publishing.service.gov.u … _force.pdf

Hi there

I am not an expert, however my situation is very similar to yours, so I am happy to share the advice I have been given and taken.

Technically a UK LTD company is a seperate legal entity to yourself; it resides, operates and pays taxes only in the UK.  HOWEVER I did have to make some adjustments to my business to ensure I wasn't 'stung' by moving here to Spain.

1) I added my sister as a 2nd director (no shares). This is to stop the authorities in Spain seeing me as 'quasi-self employed' and treating me as 'autonomo' with all that entails (eg hefty monthly social security payments regardless of income etc)

2) My new director issued me with a revised contract of employment stating that all work as director for the LTD company would be physically carried out in the UK. This was to stop the Spanish authorities treating me as a 'remote worker' which would entail the company being forced to set up a Spanish Office and pay Spanish Corp Tax.  I can also prove this from my airline tickets.  I return the UK to carry out all my business.

3) Not so relevent to you as you aren't drawing a salary or dividends.  However I redressed my salary / dividend balance as you have to pay Spanish tax on worldwide dividend income.  Whereas a UK PAYE salary paid into a UK account below 60,000 Euros does not need to be declared.  As the UK personal allowance is far more generous...this is a good move.

The main thing to take into account is that nothing can be carried out on Spanish soil relating to your UK LTD company - no remote working, video meetings - nada!  If any work is carried out on Spanish soil  then, basically, you have had it!  You need to set up a Spanish office for your UK company.

I hope this helps

Bueno Suerte!

Daz.

A couple of comments . 

I may have misunderstood but it appeared to me that the inclusion of your sister was a ploy rather than actual, if so then illegal !

Secondly:   If one is tax resident in Spain then they must declare their worldwide income no matter how large or small,  and pay all tax in spain .   

The  only exceptions are crown pensions and U.K. rental income but even they must also be declared in spain. 

In my case my crown pension means I pay a lot more tax (150 % more) than I did before disclosing it became a legal requirement under the law. 

One cannot choose, in any circumstances,  to declare in U.K. and benefit from the more generous tax free allowance. 

PS If in doubt take a look here

https://assets.publishing.service.gov.u … _force.pdf

Thanks for you reply

Adding my sister as a Director is not a ruse, she is a bonefide Director as registered with Companies House.  When I moved to Spain I felt it important the company had a UK based director.  The point is that if you are a sole director of a UK Ltd Company the Spanish Authorities may/will see you as really being self-employed.  This is not the case...I am an employee of a UK LTD Company.

As for your 2nd point, please read the official guidance from the Hacienda below...

Residents working abroad

You may be exempt from Spanish income tax, even if you're a Spanish resident, if you meet the following criteria:

    your work is effectively carried out outside Spain
    your employer is a non-resident
    you earn less than €60,100 a year
    you pay tax on this income in another country

All of this applies to me.   I too expected to declare my worldwide income and was surprised to be told by the tax office that as my work was carried out in the UK for a UK employer and UK tax had been paid - I did not need to declare it.

As I said in my original post - I can only post my personal experience. I hope this helps clarify things

Dazbear, Johncar

It's been a couple of years since the last reply on this thread, but have you (or anyone else) found that the approach of having a UK limited company but being resident in Spain has worked for you without the Spanish authorities declaring that the company is really resident in Spain?

I am in a similar situation and would like to know I the approach outlined above is still valid?

Thanks

Chaz

A blast from the past!  Basically I had to wind up the UK Ltd company! 

The crux is.....any work on Spanish soil (even 'remote working' for a UK LTD company) and there is a risk of the company being classed as resident in Spain.  This requires you to go Autonomo or set up a Spanish office with one of the directors being Autonomo. While this has many advantages re Spanish health care, 1/2 state pension after paying 15 years etc. in my situation the fixed 300 Euros per month SS (NI) payments was too much.

The killer for me was the yearly M720 declaration of worldwide assets where (by law) I had to declare my shares in my own (UK) company.  The formula from the Hacienda resulted in the company being valued at stupid money, even though it was running at a loss (average of the last 3 years profits multiplied by 5!) In Spanish law the UK Ltd company was not seen as a seperate entity, rather my own personal asset!  While this did not result in any tax, it had flagged the company to the Hacienda and at this point I decided to wind down.....

I continued to work for the company on UK soil only in order to run down the company (flying back every 6 weeks) and drawing a UK PAYE salary.  The salary had to be declared in the UK and Spain....UK tax was paid and was credited towards my Spanish tax bill.  However as the personal allowance is lower in Spain there was about 1000 euros per year top-up tax to pay.

The process took 2 years to wind down efficiently and all the time I was worried about a call from the Hacienda.....I did make the mistake in the first year of continuing to draw a UK dividend - resulting in quite a sting in Spanish tax!!!

Hope this helps.

Thanks for your very informed response!

I also found a long discussion on this topic that you had contributed to here: https://britishexpats.com/forum/spain-7 … ent-909371

However most of the discussion on the britishexpats site ignored the issue that you have highlighted which is the UK company can be regarded as resident in Spain. 

I also found and read the UK - Spain Dual Taxation Treaty (https://assets.publishing.service.gov.u … _force.pdf) and Article 5, paragraph 5 of this seems quite clear to me - work in Spain (concluding contracts) will deem the company as resident in Spain.

A UK law firm who claimed they specialised in UK/Spain tax issues told me by phone that this was not the case.  A follow up email from them explained that they would register the UK company (which I can do myself) and then do translations, notarisations, and apostilling at Foreign Office.  They would then get a CIF for me.  They didn't give any more details, but perhaps this was the steps needed to somehow register the UK ltd in Spain for corporation tax, and pay it in Spain rather than the UK, but no going as far as registering a Spanish SL. (They wanted over £3000 for this!). Did you look into this route?

The incorporated business was registered in uk and you have a director based in uk part running the business and therefore is subject  to uk corporation tax.

Hi

I am in a similar process and wanted to see if we could chat further about your post.