Can a non resident who frequents the UK become a sole trader in the UK and pay taxes? .Can such an individual open a bank account and operate it as a sole trader? Is this allowed by law ?
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You will be considered resident for tax purposes in the UK, if you will be spending more than 183 days in the UK.
If you are considered UK resident ie spending 183 days in UK, then you will be taxed in the UK. You can open a bank account and operate it as a sole trader and its allowed by law and you income will be deposited in your UK bank. You won’t be making income tax deductions from your income in any other country that you may be working in and instead make PAYE monthly payments to HM Revenue & Customs.
I presume that will be physically performing your work in the UK, you will then have to pay UK social security system. Under the EU rules, you can only be governed by one social security system. This is determined according to the place where you work, or if you regularly work in more than one EU country, by the place where you reside if you perform most of your work there. As a result, you will pay social security to the country which you perform most of your work there, which I think is UK in your case.
As for your sole trader business VAT, you pay VAT (if the business products qualify for VAT) as usually if the sales exceed £77k (generally over a year). The GENERAL RULE is If ANY company sales in the UK /EU exceed £77k then they have to register for VAT and thus charge VAT. It does not matter if the company is registered in Russia, USA, Germany, or the UK….the provisions of such services are considered as provided where the customer resides if the customer is an individual.
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how about non residents or visitors particularly someone who has businesses in other countries
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If you are a non-residents or visitors particularly or someone who has businesses in other countries, say France .You will be considered resident for tax purposes in the UK (domiciled or non-domiciled in UK- see explanation below), if you will be spending more than 183 days in the UK. You would be considered tax resident in France if you are spending more than 183 days in France. Since there are only 365 days in a year you cant be both. However in the case that you end up paying tax in both countries (very unlikely), you can claim tax credits for double taxation. The opposite is true ie if you spending more than 183 days in the France, then you won’t be UK resident. Again the same principle apply to social security as said before. However if you can choose to be UK resident and non-UK domiciled. Non domiciled & UK resident are individuals who have come to the UK but have retained their non-UK domicile (usually from having non-UK domiciled parents and maintaining, despite being resident in the UK, that the UK is not intended to be their permanent home). The individuals concerned have been able to keep non-UK income and capital gains outside the UK tax net, unless and until such income or gains are required in the UK.N on-UK domiciled individuals have for a long time enjoyed a favourable tax treatment which is: you can choose to have your non-UK income and gains taxed in the UK only to the extent that they are brought into or enjoyed in the UK hence you only taxed on the ‘remitted’ income and gains but an annual £30,000 or £50,000 remittance basis charge may also be due in certain situations. Depending on your expected gains this may be worthwhile but the rules have been changing for the past few years and are likely to keep changing and 2012/13 remittance limits see http://www.hmrc.gov.uk/international/remittance.htm.
However if you choose to be UK resident and domiciled – you are likely to be liable to tax on worldwide income and gains ie HMRC will tax you on that total income/gains as if the legal structures you have put in place in other countries were not in existence.
In addition if you choose to go resident& non-domicile, and in order not to be taxed on your non-uk income you need to prove that structures that are outside UK are managed and controlled outside UK. The importance of the managed and controlled test is that if a company is incorporated outside the UK, it can still be liable to UK tax if it is managed and controlled in the UK.
Chartered Accountant >15 years + Qualified IFA