Employed by my Uk ltd company, living in France

[RSR Fulfillment (FR & DE)]

So far, for the first two years of trading I was able to draw cash monthly under the directors loan repayment category in the accounts. That loan account is now empty.

My personal accountant in France tells me that if the UK ltd company salaries me, that income tax and NI is payable in UK only.

Is this true? And is it true for a limited time or indefinite?

How do the mecahnics work of taking cash by salary, instead of director's loan? I had planned to take dividends after the loan account ran out (also a simple mechanism), so I never looked into being salaried?

Can I just take the cash monthly and then sort the classification later, or does it need to be payrolled, made official somehow on an ongoing basis? I would only be taking up to the threshold out as salary, so approx £12500. Would the company be burdened by any costs to facilitate this way of me drawing cash? I am wondering if NI charges would be made on the company and payroll admin charges.

Many thanks.

 

[UK Contractor Accountant]

if you are tax resident in France then you will pay tax in France on your salary.

I assume you run your UK company from France in which case your UK Company may also be resident in France for tax (dual resident).

 

[DWS]

So far, for the first two years of trading I was able to draw cash monthly under the directors loan repayment category in the accounts. That loan account is now empty.

My personal accountant in France tells me that if the UK ltd company salaries me, that income tax and NI is payable in UK only.

Is this true? And is it true for a limited time or indefinite?

How do the mecahnics work of taking cash by salary, instead of director's loan? I had planned to take dividends after the loan account ran out (also a simple mechanism), so I never looked into being salaried?

Can I just take the cash monthly and then sort the classification later, or does it need to be payrolled, made official somehow on an ongoing basis? I would only be taking up to the threshold out as salary, so approx £12500. Would the company be burdened by any costs to facilitate this way of me drawing cash? I am wondering if NI charges would be made on the company and payroll admin charges.

Many thanks.

Where are you tax resident?
Do you not have a UK Accountant who has been advising and submitting the Company accounts?
Depending on your personal position regarding tax could it not have been beneficial to have paid yourself a salary in the past 2 years rather than withdrawing the money you lent the Company?

 

[Newchodge]

Do you have a visa that allows you to work in France? If not it is going to be difficult to find a way to pay you legally. An employee of a UK company living and working in France is covered by French employment law and the French tax and social security system. The only reason I can think that a French accountant would have told you to be paid via UK payroll is because you cannot work in France?

 

[elaine@cheapaccounting]

If you want to take money by way of salary then in all likelihood you will need a PAYE scheme.

However how you extract money form your company (dividends and / or salary) is always subject to a conversation about the individual circumstances of the tax payer. Certainly in your case your tax residency (this is a very important aspect to consider in your case) as well as what other income your have etc.

Why do you have a UK Limited Company? Is the business UK based?

This might be a useful read:

France - Individual - Income determination

Detailed description of income determination for individual income tax purposes in France

taxsummaries.pwc.com

 

[elaine@cheapaccounting]

Can I just take the cash monthly and then sort the classification later, or does it need to be payrolled, made official somehow on an ongoing basis? I would only be taking up to the threshold out as salary, so approx £12500. Would the company be burdened by any costs to facilitate this way of me drawing cash? I am wondering if NI charges would be made on the company and payroll admin charges.

Note:

You would need a payroll

At the amount you mention you would pay National Insurance - the thresholds changed from this April.

 

[RSR Fulfillment (FR & DE)]

If you want to take money by way of salary then in all likelihood you will need a PAYE scheme.

However how you extract money form your company (dividends and / or salary) is always subject to a conversation about the individual circumstances of the tax payer. Certainly in your case your tax residency (this is a very important aspect to consider in your case) as well as what other income your have etc.

Why do you have a UK Limited Company? Is the business UK based?

This might be a useful read:

France - Individual - Income determination

Detailed description of income determination for individual income tax purposes in France

taxsummaries.pwc.com

Thanks. I have a UK company because it is easier than having a French one. It was set up very carefully:

There is stock in UK and France
There are sales in UK and France
There is a shareholding director who is a UK resident managing the stock and sales in UK
All strategic decisions are made during directors meetings, held in the UK.

I am a French resident, not an illegal alien / tourist.

How are PAYE systems managed, how much does it cost?

 

[Newchodge]

Thanks. I have a UK company because it is easier than having a French one. It was set up very carefully:

There is stock in UK and France
There are sales in UK and France
There is a shareholding director who is a UK resident managing the stock and sales in UK
All strategic decisions are made during directors meetings, held in the UK.

I am a French resident, not an illegal alien / tourist.

How are PAYE systems managed, how much does it cost?

How many people would be on the UK payroll?
How often would they be paid?

 

[elaine@cheapaccounting]

Thanks. I have a UK company because it is easier than having a French one. It was set up very carefully:

There is stock in UK and France
There are sales in UK and France
There is a shareholding director who is a UK resident managing the stock and sales in UK
All strategic decisions are made during directors meetings, held in the UK.

I am a French resident, not an illegal alien / tourist.

How are PAYE systems managed, how much does it cost?

Great stuff.

You would need a UK accountant or payroll provider to set up your PAYE scheme. Fees vary .... I can't quote for you as we only provide payroll as part of our general accounting services. I'm sure they'll be someone else on here who can advise on the costs.

As to the profit extraction salary that is certainly something that your co-director / shareholder should be considering generally to ensure you're both happy with the arrangements - certainly as you both may have different tax jurisdiction. It's often / usually part of the shareholder agreement. Good luck

 

[Bobbo]

Thanks. I have a UK company because it is easier than having a French one. It was set up very carefully:

There is stock in UK and France
There are sales in UK and France
There is a shareholding director who is a UK resident managing the stock and sales in UK
All strategic decisions are made during directors meetings, held in the UK.

I am a French resident, not an illegal alien / tourist.

How are PAYE systems managed, how much does it cost?

Does the company not already have a PAYE scheme?

How is the other director being remunerated at present?

As you are French resident one would assume a salary would be taxable in France, with relief for UK tax suffered on it, if any.

Sales in France, stock in France and you in France makes me wonder if the company has at least a permanent establish in France, even if you have carefully structured it to avoid the whole company being tax resident there.

As to "Can I just take the cash monthly and then sort the classification later" - No. You don't have a time machine so you can't change the past. I suppose in the absence of another classification, an undefined withdrawal would be loan from the company to you.

 

[RSR Fulfillment (FR & DE)]

Does the company not already have a PAYE scheme?

How is the other director being remunerated at present?

As you are French resident one would assume a salary would be taxable in France, with relief for UK tax suffered on it, if any.

Sales in France, stock in France and you in France makes me wonder if the company has at least a permanent establish in France, even if you have carefully structured it to avoid the whole company being tax resident there.

As to "Can I just take the cash monthly and then sort the classification later" - No. You don't have a time machine so you can't change the past. I suppose in the absence of another classification, an undefined withdrawal would be loan from the company to you.

Not yet. Director 2 joined last year and is taking no money out until it is more profitable in UK. I have been relaying myself via directors loan until now.

I agree that I thought I would be taxed for my income in France. The French accountant says not. I am waiting for her source to verify.

No it cannot have a permanently established base in France, the stock is in fact in Kehl, Germany, 1km over the border of Strasbourg where I live, the stock is not in France. No established base, the setup is watertight.

 

[Newchodge]

Not yet. Director 2 joined last year and is taking no money out until it is more profitable in UK. I have been relaying myself via directors loan until now.

I agree that I thought I would be taxed for my income in France. The French accountant says not. I am waiting for her source to verify.

No it cannot have a permanently established base in France, the stock is in fact in Kehl, Germany, 1km over the border of Strasbourg where I live, the stock is not in France. No established base, the setup is watertight.

Perhaps you might speak to the professional who helped you set up the organisation, about how you can take a salary?

If both Directors are on UK payroll there is no empoyers' NI payable up to £12570 pa. If only 1 person is on payrolland they are a Director NI would be 15% on annual income over £417 per month. My own payroll business would charge £10/month plus VAT for a monthly payroll for 2 directors.

 

[RSR Fulfillment (FR & DE)]

How many people would be on the UK payroll?
How often would they be paid?

How many people would be on the UK payroll?
How often would they be paid?

Just me, being £1060 per month I think. The rest likely as dividend.

 

[RSR Fulfillment (FR & DE)]

Perhaps you might speak to the professional who helped you set up the organisation, about how you can take a salary?

If both Directors are on UK payroll there is no empoyers' NI payable up to £12570 pa. If only 1 person is on payrolland they are a Director NI would be 15% on annual income over £417 per month. My own payroll business would charge £10/month plus VAT for a monthly payroll for 2 directors.

I only want to be paid £12570 per year. Does this mean payroll is not required?

 

[elaine@cheapaccounting]

I only want to be paid £12570 per year. Does this mean payroll is not required?

Payroll is required and, as the only employee, you will pay some National Insurance.

 

[elaine@cheapaccounting]

Just me, being £1060 per month I think. The rest likely as dividend.

Just a reminder, I'm sure you know , dividends must be paid in proportion to the shareholding.

 

[RSR Fulfillment (FR & DE)]

Perhaps you might speak to the professional who helped you set up the organisation, about how you can take a salary?

If both Directors are on UK payroll there is no empoyers' NI payable up to £12570 pa. If only 1 person is on payrolland they are a Director NI would be 15% on annual income over £417 per month. My own payroll business would charge £10/month plus VAT for a monthly payroll for 2 directors.

I can't afford him, he was charging £100 per hour. I now submit the returns myself with help from a book keeper. The company is tiny and very lean with a turnover if £300k per year.

 

[RSR Fulfillment (FR & DE)]

Payroll is required and, as the only employee, you will pay some National Insurance.

Ok.....thanks. some progress i make here then! I seem to be spending some time here explaining that the company is kosha etc.

 

[elaine@cheapaccounting]

I can't afford him, he was charging £100 per hour. I now submit the returns myself with help from a book keeper. The company is tiny and very lean with a turnover if £300k per year.

Not an unreasonable cost given the expertise he would likely to have to deal with the French, German (stock held there - place of supply?), UK taxes including VAT, tax residency etc

The set up does hit a number of issues that a straight forward UK based business would not.

I do appreciate that it can seem a lot to pay out for advice but in your circs it may be an amount well spent. The very best of luck.

 

[elaine@cheapaccounting]

Ok.....thanks. some progress i make here then! I seem to be spending some time here explaining that the company is kosha etc.

Please don't think we are trying to find fault. It's absolutely natural for "an expert" to want to understand why something has been set up in a certain way so that they can try to give the best advice based on specific circs.

As I've said, yours is not a "run of the mill" UK based company and it does hit non UK tax issues which cannot be ignored.

Good luck

 

[UK Contractor Accountant]

Payroll is required and, as the only employee, you will pay some National Insurance.

- for a tax resident overseas?

maybe voluntary?

paid for Director duties in the UK maybe?

 

[UK Contractor Accountant]

Typically, individuals relocating abroad permanently will stop paying NIC in the UK and pay social security (or the domestic equivalent) in their new country of residence. There is the option to pay voluntary class 3 NIC while abroad to qualify for the UK state pension in the future.

If people relocate abroad temporarily for work, they may continue to pay NIC in the UK, depending on the length of time that they are working abroad and the country to which they are relocating.

 

[elaine@cheapaccounting]

- for a tax resident overseas?

maybe voluntary?

Would you still need to put on payroll and have a NT tax code?

I have assumed that the OP was originally resident in the UK at some point - which may or may not be correct of course.

This is a good write up from https://www.scruttonbland.co.uk/news-views/uk-employers-with-overseas-employees/

If also highlights the issue about where you pay tax

PAYE: Income Tax

If an employee is not resident in the UK, generally no PAYE income tax deductions are due unless the employee performs some of their duties in the UK. If there is no PAYE obligation, it is possible to pay a non-resident employee on a gross basis via a UK payroll. If the employee in question has previously been resident in the UK, a Form P85 will need to be submitted to HMRC so that an NT (“No Tax”) PAYE code can be issued (NB an NT tax code will only be issued by HMRC if the employee’s UK tax affairs are up to date).

If the overseas employee is performing all their duties of employment outside the UK, it is highly likely that they will be subject to tax in the country where they are based. In certain situations, a UK employer is liable to deduct foreign tax from salary payments and pay this over to the overseas authority. Local advice will therefore be required in most cases to confirm whether the employer has an obligation to withhold foreign tax.


Even if local advice suggests that there is no legal requirement to do so, a UK employer may still choose to register for payroll taxes in the employee’s home country on a voluntary basis to ensure all of its overseas tax withholding obligations are fulfilled and also to simplify tax reporting for the individual employee. If no overseas withholding tax is applied and employees are paid via a UK payroll on a gross basis, the employee will need to settle any taxes due in their country of residence by filing a tax return in that country. Setting up an overseas payroll for a UK company is also something with which our fellow GGI colleagues around the globe can assist with.

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Also worth noting from that write up:

Permanent Establishment

An overseas employee’s precise role and responsibilities often need to be managed carefully in the country where they are based. This is because corporation tax registration may be required if it is deemed that the presence of the employee leads to the creation of a ‘permanent establishment’ for the employer in that jurisdiction.


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Not a straight forward issue

 

[WaveJumper]

Just a reminder, I'm sure you know , dividends must be paid in proportion to the shareholding.

And hopefully inline with the profit

 

[RSR Fulfillment (FR & DE)]

Would you still need to put on payroll and have a NT tax code?

I have assumed that the OP was originally resident in the UK at some point - which may or may not be correct of course.

This is a good write up from https://www.scruttonbland.co.uk/news-views/uk-employers-with-overseas-employees/

If also highlights the issue about where you pay tax

PAYE: Income Tax

If an employee is not resident in the UK, generally no PAYE income tax deductions are due unless the employee performs some of their duties in the UK. If there is no PAYE obligation, it is possible to pay a non-resident employee on a gross basis via a UK payroll. If the employee in question has previously been resident in the UK, a Form P85 will need to be submitted to HMRC so that an NT (“No Tax”) PAYE code can be issued (NB an NT tax code will only be issued by HMRC if the employee’s UK tax affairs are up to date).

If the overseas employee is performing all their duties of employment outside the UK, it is highly likely that they will be subject to tax in the country where they are based. In certain situations, a UK employer is liable to deduct foreign tax from salary payments and pay this over to the overseas authority. Local advice will therefore be required in most cases to confirm whether the employer has an obligation to withhold foreign tax.


Even if local advice suggests that there is no legal requirement to do so, a UK employer may still choose to register for payroll taxes in the employee’s home country on a voluntary basis to ensure all of its overseas tax withholding obligations are fulfilled and also to simplify tax reporting for the individual employee. If no overseas withholding tax is applied and employees are paid via a UK payroll on a gross basis, the employee will need to settle any taxes due in their country of residence by filing a tax return in that country. Setting up an overseas payroll for a UK company is also something with which our fellow GGI colleagues around the globe can assist with.

--------------------------------------

--------------------------------------

Also worth noting from that write up:

Permanent Establishment

An overseas employee’s precise role and responsibilities often need to be managed carefully in the country where they are based. This is because corporation tax registration may be required if it is deemed that the presence of the employee leads to the creation of a ‘permanent establishment’ for the employer in that jurisdiction.


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Not a straight forward issue

I spend 1 week in the UK warehouse every 6 weeks

 

[RSR Fulfillment (FR & DE)]

I moved to France from UK in 2018