With the spread of COVID-19, causing lockdowns and travel bans all over the world, the normal way of life for most people is on hold temporarily.
If you are running a UK-based business from abroad, that leaves several questions unanswered.
Whilst your company directors and employees may no longer be able to travel internationally, will your tax residence be affected, and if you are no longer able to meet your usual UK tax obligations (because of the virus), will you still be penalised?
We have pulled out some key questions and look at some of the key implications for tax, and have offered some guidance surrounding them, which we hope you find useful.
Impacts of travel restrictions
You may be forced to spend more time than you would usually do in one country. Because of this, how will your company's residence will be treated for tax purposes?
Tax residence can be a very complex issue, with many variables that determine your status and that of your business, so there is no single answer for everyone running a business from abroad. However, there are signs that tax authorities are being more understanding and flexible due to the extraordinary circumstances we're going through right now, and that the inability to travel because of COVID-19.
The Organisation for Economic Co-operation and Development (OECD) has released its analysis of the impact of COVID-19 on tax treaties, which says the situation is “unlikely” to affect individual and corporate residence determinations and permanent establishments.
Meanwhile, HMRC has not formally issued new legislation on company residence or permanent establishments, but says its existing guidance already provides flexibility to deal with changes in business activities necessitated by the response to the COVID-19 pandemic”.
Under normal circumstances, the physical location of activities such as board meetings can be a factor in determining residence, but HMRC has assured businesses that a company will not “necessarily become resident in the UK because a few board meetings are held here”, and that it will take a “holistic view” of each case.
If your company is resident in the UK and you are concerned about whether it will become resident elsewhere, you will need to consult official guidance for the country you are based in.
If you are not sure if your business will be affected, we can assess your situation on an individual basis and advise you on the best course of action.
Deferred deadlines and payment arrangements
If you are likely to struggle paying your next tax bill because of the financial effects of COVID-19, the Government has put in place several measures to help all businesses based in the UK.
- If you are running a UK VAT-registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you can choose to defer the payment to as late as 31 March 2021. This does not cover payments for VAT MOSS or import VAT.
- If you are a self-assessment taxpayer and would have had a second payment on account due on 31 July 2020, you can defer this to 31 January 2021.
Both of these deferrals are optional, and you do not need to apply to HMRC to use them. VAT returns will still need to be submitted on the due dates although payments can be deferred.
You can also contact HMRC's coronavirus helpline if you are unable to pay any of your other tax bills because of the virus.
We Are Here For Your Accounting Journey.
We offer a one-stop shop for overseas businesses looking to set up a new company, or open an office in the UK, as well as helping UK businesses expanding globally.
Please contact Partner Alan Rajah on +44 (0)20 8861 7575 to speak about any specialist tax advice about your UK-based business, or send us an email & we will contact you straight back.