If you're an expat who owns or directs a UK-registered company but now live overseas, you might be wondering: Where does your company pay corporation tax?
It’s a complex area of international tax that involves UK law, foreign tax rules, and the fine details of Double Taxation Agreements (DTAs). But understanding it is vital if you want to avoid dual tax liabilities — and potentially benefit from more favourable rules in your new country of residence.
Here’s what you need to know.
UK Company Tax Residence – The Basic Rule
According to Section 14 of the Corporation Tax Act 2009 (CTA 2009), a company that is incorporated in the UK is automatically considered UK tax resident.
In most cases, this means it pays UK corporation tax on its worldwide profits - regardless of where its director lives or operates from.
But what if you’ve moved abroad, and you now manage the company from your home office in Dubai, Lisbon or Sydney?
What If the Company Is Also Resident Elsewhere?
Many countries determine corporate tax residence based on management and control, not incorporation. So, if you’re now managing your UK company from overseas, that country may also treat the company as resident for tax purposes under its own rules.
In that case, you could face:
A tax obligation in the UK (based on UK incorporation)
A tax obligation overseas (based on local tax law)
This is where Double Taxation Agreements (DTAs) become essential.
The Tie-Breaker: Double Taxation Agreements & Treaty Residence
Under Section 18 CTA 2009, UK tax law allows an exception to the default UK residence rule if the relevant double tax treaty applies.
To qualify for treaty non-residence, both of the following must be true:
(a) The company is considered tax resident in the other country under its domestic laws; and
(b) Under the DTA, the company is deemed non-UK resident by applying the treaty’s rules - specifically the “tie-breaker” test in Article 4(3).
Most treaties state that a company is tax resident in the country where its “place of effective management” is situated.
What Is Effective Management?
According to the OECD’s Model Tax Convention, the place of effective management is generally where key management and commercial decisions are made.
This might include:
Where board meetings are held
Where directors or decision-makers operate
Where accounting and admin functions are based
So if you, as the sole director/shareholder, now live and run the business overseas, and there is no significant UK-based management, the effective management may well be overseas.
If this can be evidenced and is accepted by the local authority and HMRC, your company can be treated as treaty non-resident.
What Does Treaty Non-Resident Mean?
If your company is classed as treaty non-resident, then under Section 5 CTA 2009, only UK-source income is subject to UK corporation tax.
This can be a powerful tool for internationally mobile entrepreneurs. But it must be properly structured and supported with the right documentation, including evidence of effective management abroad.
Key Takeaways
A UK-incorporated company is usually UK tax resident - but this can be overridden by a relevant DTA.
To do so, your company must be:
Resident in another country under that country’s domestic law; and
Considered non-UK resident under the DTA’s tie-breaker clause.
Effective management is crucial, and it must genuinely take place overseas.
This can reduce or limit your UK tax exposure - but only if done correctly.
Need Help With Company Tax Residency as an Expat?
We work with globally mobile founders, directors and business owners who need specialist advice on cross-border company tax matters.
If you’re an expat running a UK company from abroad, don’t wait for HMRC to ask the questions - speak to our team first. We’ll help you manage residency status, apply the right treaty rules, and stay on the right side of both UK and local tax authorities.
Share this post: