The employment tax and social security issues surrounding non-resident directors of UK entities is a commonly misunderstood area which can lead to unexpected liabilities and penalties. It is a common area for compliance checks by HMRC.

A UK entity with non-resident directors will have an obligation to report, and subject to withholding, remuneration received by non-resident directors in respect of the work they do for the UK entity and also for the reimbursement of expenses that may be considered “ordinary commuting” (such as hotel stays whilst in the UK for board meetings).

Historically some non-resident directors have purported to provide their services via a personal service company – HMRC do not accept that this negates the obligations for the UK entity.

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