UK tax for overseas directors of a UK subsidiary

Most UK subsidiaries are directed, at least in part, by executives of the parent who live abroad. UK tax treats a director differently from an employee. Fees and salary for a director's duties performed in the UK are taxable in the UK from the first day, with no minimum number of days, and the double tax treaty usually leaves that right with the UK. The UK company must operate PAYE on it. Paying the director entirely from the parent's payroll abroad does not remove the UK charge on duties performed here.

What is taxed in the UK

• Pay for duties performed in the UK: board meetings held here, days working in the UK office, visits to UK customers as a director.
• Pay for duties performed abroad is outside UK tax for a non-resident director, but only if the split is documented and the PAYE treatment reflects it.
• Where the director receives nothing for the UK role, and is paid only by the parent for a role there, the parent's pay can still be partly UK-taxable if part of it is for the UK directorship. The answer depends on the facts, which is set at the start rather than argued about after.

What we put in place

1. A written allocation of each director's duties between the UK and elsewhere, agreed with the group.
2. PAYE on the UK-duty element, or an HMRC code that stops UK deductions where there are no UK duties, applied for rather than assumed.
3. Social security. Whether UK National Insurance is due depends on the agreement between the UK and the director's country. The UK has one with both the United States and India, so a director posted from either can normally stay in their home system for a defined period with a certificate of coverage from the home authority, instead of paying UK National Insurance. The India agreement is a Double Contributions Convention, which covers contribution liability only and gives no entitlement to benefits in the other country. Countries with no agreement at all mean UK contributions from the first payment. We establish which applies and get the certificate or set the contributions up.
4. A UK personal tax return for the director where one is needed, including the residence pages HMRC's own website cannot file.
5. Travel and accommodation. A non-resident director's travel to UK board meetings can be paid without a tax charge in defined circumstances, and outside them is a taxable benefit. We set the expenses policy so the group knows which is which.

Days in the UK

A director who spends enough time in the UK can become UK resident and taxable here on worldwide income. The Statutory Residence Test counts days and ties. For an executive who visits monthly the risk is low; for one who moves here to run the launch for a year it is real, and the position should be planned before the flight. Our sister brand Expat Accountants covers that side, and the two teams work together.