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Paying corporation tax in two countries

Q: I have a registered UK company and am currently working in the US for a company. Do I have to pay corporation tax in the US and UK or is there a double taxation agreement between the two countries?

A: This is a complex area of tax law and I am not clear on the facts and issues in your question. For this reason I strongly recommend that you brief an international tax adviser who can give you specific advice once they are clear about the particular circumstances of your case.

In relation to the question you posed you state in the second sentence that you are ‘working in the US for a company’. This could mean either that you are an employee of a US company or that your UK company has secured work in the USA which requires you to be in that country. This raises some questions. How long will you be in the USA? What are the terms of your work or employment?

In general terms, under UK tax law, any company that is incorporated in the UK is treated as being UK resident no matter where it is managed and controlled. Double tax relief is available in respect of any foreign tax suffered on both income and gains provided there is a double taxation agreement between the UK and the other country, which there is between the UK and the USA.

The relief for tax on overseas income is limited to the UK corporation tax payable on that overseas income. Any unrelieved foreign tax is wasted and cannot be carried forward or back. There is a further consideration. If you have a significant share of the UK company, are its only employee and you provide services you may find yourself in an IR35 situation. If this is the case the tax position may make it inadvisable to pay a dividend. As I stated at the outset this is a complex issue and it is not sensible to proceed without taking detailed advice from an accountant who is familiar with the relevant issues and your particular circumstances.

Re: Paying corporation tax in two countries

If you're running a limited company, will I need to pay corporation tax - and how should this be calculated?

Re: Paying corporation tax in two countries

If you are running a limited company then you may need to pay Corporation Tax (CT). Corporation Tax is a tax on your company’s overall taxable profit's.

The word ‘company’ is also used to include:
● members’ clubs, societies and associations
● trade associations
● housing associations
● groups of individuals carrying on a business but not as a partnership, (for example, co-operatives).

HMRC will send an introductory package to new companies. This helps to make it easier for companies registered under the Companies Act to give HMRC the information needed to set up their tax records from the right facts.

As a director of a limited company, you are also an employee of the business and need to pay tax on your salary (including Benefit's in Kind, dividend income and other income derived from the company) and operate PAYE and NICs for yourself and all employees.

Corporation Tax is due for ‘Accounting Periods’ which are normally 12 months long.

To work out how much is owed, you will need to know how much taxable profit you made in each accounting period. For more information on accounting periods, visit www.businesslink.gov.uk.