Moving a business from the UK or Europe

Founders in the UK and Europe sometimes ask whether setting up in the UAE changes where they are taxed. The short answer is that each country decides tax residence with its own tests, and a UAE business licence is not one of the tests the UK uses. This guide uses the UK as its example.

Residence is decided by tests

Each country decides tax residence using its own tests. In the UK, HM Revenue & Customs (HMRC) applies the Statutory Residence Test, which came into effect on 6 April 2013. It looks at each tax year (6 April to 5 April) separately, and at the days you spend in the UK and your connections to it. A UK resident normally pays UK tax on income from the UK and from abroad; a non-resident pays UK tax only on UK income, according to GOV.UK.

In outline, according to GOV.UK and HMRC's guidance note RDR3, you are UK resident for a tax year if you meet one of the automatic UK tests or the sufficient ties test, and you do not meet any of the automatic overseas tests:

• Automatic UK tests. For example, spending 183 or more days in the UK in the tax year, having a home in the UK that meets set conditions, or working full-time in the UK over a 365-day period.
• Automatic overseas tests. For example, spending fewer than 16 days in the UK (fewer than 46 if you were not UK resident in any of the previous three tax years), or working full-time abroad with limited days and work in the UK.
• Sufficient ties test. If none of the automatic tests decides it, your days in the UK are weighed together with your ties to the UK, such as family, accommodation and work.

The tests are about where you spend your time and what connects you to the UK. A business licence in another country is not one of them. Setting up a company in the UAE may go with a change in where you live and work, and that can change the result. The licence by itself does not.

Company and person are different

A company's tax residence is decided separately from yours, under different rules. HMRC's manual sets out two UK rules for companies:

• Incorporation. A company incorporated in the UK is, as a rule, resident in the UK.
• Central management and control. A company incorporated elsewhere is resident in the UK if its central management and control is exercised in the UK. HMRC says this is mainly a question of fact, about where the highest level of control of the business actually sits. That control may be exercised by the board, or by someone else who has in fact taken it, such as a parent company or an individual shareholder.

A company that is resident in the UK can also be resident in another country under that country's own law, and HMRC then calls it dual resident. So where you live and where your UAE company is managed and controlled can each matter, and they are tested separately.

Other countries

This guide uses the UK as its example because HMRC publishes its rules in English. Other countries have their own tests and their own tax authority, and we have not covered them here. Ask that authority, or an adviser in that country.

Questions to take to an adviser

• Which country will treat me as resident, and on what dates?
• How will the company's profits be treated where I live?
• What must I report, and by when?

What we will not tell you

We do not give tax, immigration or legal advice. Check with a qualified adviser in your home country before you decide.