A UAE company and HMRC: which rule actually catches you

Most people arriving from the UK have been told to worry about the controlled foreign company rules. Those rules genuinely do not apply to them, and the relief is misplaced, because the regime that does apply is harder and its best-known defence was repealed last year.

The CFC rules really do stop at companies

TIOPA 2010 Part 9A is a corporate code. Section 371BC(1), at Step 1, provides that if none of the relevant persons is a company meeting the UK residence condition, no CFC charge arises. The 25% threshold everyone quotes sits at s.371BD(1).

A UK-resident individual can hold a relevant interest in a UAE company and still never be a chargeable company. So on this point the common advice is correct: Part 9A does not reach you personally.

Transfer of Assets Abroad is the regime that does

ITA 2007 Part 13 Chapter 2, sections 714 to 751. The charges are at s.720, s.727 and s.731. One wording detail worth getting right, because it signals whether the person advising you has read the Act: s.720 charges income treated as arising under s.721, and the power-to-enjoy conditions are in s.721, not s.720.

The charge bites on income as it arises in the person abroad, whether or not anything is distributed, and whether or not the structure saves any tax in the end.

That matters more than it sounds. Most published commentary, and a good deal of advice still being given, describes s.742A as the route out. It is not a route out any more. What survives is sections 736 to 742, in particular s.737, where the taxpayer must satisfy HMRC either that it would not be reasonable to conclude that avoiding tax was a purpose, or that all the transactions were genuine commercial transactions none of which was more than incidentally designed for avoidance.

The burden is yours. That defence is real and winnable for a genuine operating business, but it is argued, not assumed.

The 2024 change closed the Fisher gap

In Fisher v HMRC [2023] UKSC 44 the Supreme Court held unanimously that liability under these provisions is restricted to the transferor. Parliament responded.

The response is Finance (No. 2) Act 2024 section 22, and it did not amend s.720 — it inserted new sections 720A and 727A, headed "Transfers by closely-held companies". They apply the charge to an individual with a qualifying interest in a closely-held company where he is involved in the company and the avoidance condition is met, with a presumption of involvement in decision-making unless he satisfies HMRC otherwise.

Central management and control can make the company British

The statutory incorporation rule is CTA 2009 s.14. Cite that alone: FA 1988 s.66 is repealed, and quoting it dates a note instantly.

A UAE-incorporated company is not caught by s.14, so the question falls to the common-law test. HMRC's own manual at INTM120060 quotes De Beers — a company resides where its real business is carried on, and the real business is carried on where the central management and control actually abides — and then adds the part that catches people: it is the highest level of control of the business which counts, and that control may be exercised by persons other than the board, including shareholders who have assumed actual management control.

So a UAE company whose real decisions are taken in the UK is UK resident and within UK corporation tax on its worldwide profits. That is worse than any look-through charge, because it taxes the company itself.

The treaty does not rescue a dual-resident company

The UK-UAE double taxation convention entered into force on 25 December 2016 and took effect from 1 January 2017.

If you were told the treaty automatically sorts out dual residence by looking at where management sits, that is a description of the OECD Model, not of this treaty.

The Statutory Residence Test is the part you can actually plan

This is where the UK is genuinely more workable than most of the markets we cover. FA 2013 Schedule 45 is arithmetic. It is mechanical, it is knowable in advance, and it can be planned against.

The binding constraint for someone claiming to have left for Dubai is the leaver sufficient-ties table:

• four ties: caught at 16 UK days
• three ties: 46 to 90 days
• two ties: 91 to 120 days

Sixteen days is not a lot. Accommodation available to you, family in the UK, work days, and a 90-day history each count as a tie, so four ties is an ordinary situation for someone who has just left, not an extreme one. Count your days and count your ties before you book anything.

Two tails to keep in view: inheritance tax does not end on the day you fly, and the temporary non-residence rule in TCGA s1M can pull gains back if you return too soon.

What this means in practice

If you are staying in the UK, a UAE company will not reduce your UK tax, and ToAA without s.742A is now a worse position than it was two years ago. There can still be sound commercial reasons for a UAE entity — Gulf customers, a neutral contracting jurisdiction, currency stability — and we are happy to build one on that basis and say so plainly.

If you are genuinely leaving, the UK is one of the cleanest departures available, precisely because the test is a day count rather than a judgement call.

What we handle

The UAE side, completely: which zone and which licence category actually fit what you sell, incorporation, the full residence visa chain, corporate tax registration, and the timing of a tax residency certificate — which cannot be issued for a future period, so the dates have to be planned rather than discovered.

What we will not do is tell you the Dubai certificate answers HMRC. It does not. Get your UK position reviewed by a UK adviser, and have them confirm your tie count in writing before you commit.