On the third day of TAXmas, we advise to thee on the tax treatment of non-resident Directors...
In a land far, far away there lived three wise men. All three were highly respected and were each so wise that they were appointed as directors of a business in the United Kingdom for which they were remunerated quite modestly.
One of the wise men disliked traveling so intensely that he undertook all of his duties from his faraway home. The second wise man felt that travelling was too time consuming and used modern technology to communicate from his faraway home rather than travel. However, it is the third wise man with whom our story is most interested. With him it was considered that there was a need for him, every so often, to travel in person to the UK to carry out his work and shepherd those who worked for him.
And so, he set off from his home in that land far, far away, travelling all of the day and all of the night until he finally reached his destination in the UK, bringing with him some expensive gifts for those who worked for him, and they were filled with great joy.
He knew that the tax collector in the UK was very keen to tax earnings paid to people from faraway lands, but being so wise he also knew that people could work in the UK for short periods without any tax being payable.
The tax collector didn’t agree with the third wise man’s thinking and told him that the short-term business visitor relaxation did not extend to office holders and, as he was a director, he would need to pay UK tax. This filled the wise man with great sadness, but the tax collector wasn’t concerned with that. The tax collector said that the employer should have withheld tax under PAYE on all of his earnings, as they hadn’t agreed any relaxations. The tax collector also said that penalties will be applied where the correct tax wasn’t paid over.
Upon hearing this the wise man didn’t feel very wise anymore but he decided that the best thing to do would be to get some proper advice and sort out his tax affairs so that those who worked for him would think him wise again (that is until they found out that tax collector was also interested in taxing their expensive gifts).
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