Can I Set Up a Company in Dubai, Not Pay Tax, and Stay in the UK?
The short answer is no. If you set up a company in Dubai whilst remaining a UK resident, your Dubai company would still be liable for UK Corporation Tax on its profits.
This is one of the most common misconceptions we encounter, and it's costing entrepreneurs dearly. Let's explain why this seemingly clever tax strategy doesn't work and what your genuine options are.
Why Your Dubai Company Would Still Pay UK Tax
The issue comes down to where your company is "managed and controlled" from. Under the UK-UAE tax treaty, it stipulates that where the company's control and management reside, they are taxed.
Say you're sitting in your home office in the UK, making strategic decisions for your Dubai company, signing contracts, and controlling day-to-day operations, HMRC will consider that company to be UK tax resident. This means UK Corporation Tax on its worldwide profits.
The Central Management and Control Test
HMRC applies the "Central Management and Control" (CMC) test. This looks at:
- Where board meetings and strategic decisions happen
- Where contracts are negotiated and signed
- Where the company's operations are controlled from
If these activities happen in the UK, your Dubai company becomes UK tax resident, regardless of where it was incorporated.
Example Scenarios
The Online Entrepreneur: Sets up a Dubai company for their e-commerce business but continues living in London, managing suppliers from home. Result: UK Corporation Tax liability.
The Content Creator: Establishes a UAE company for YouTube revenue whilst remaining in Manchester, creating content and managing partnerships from their bedroom. Result: UK tax obligations remain.
The Consultant: Forms a Dubai company but services UK clients from their UK home office. Result: HMRC considers the company UK tax resident.
What about Double Tax Treaties?
The UK-UAE Double Tax Treaty is supposed to prevent companies from being taxed in both countries. However, this only works if your company is genuinely tax resident in one country or the other.
If HMRC successfully argues your Dubai company is actually UK tax resident, you could face the worst scenario - tax obligations in both jurisdictions.
Your Genuine Options
If you're serious about reducing your tax burden in Dubai, here are the legitimate routes:
1. Actual Relocation to Dubai
To make this work, you need to:
- Become a UAE tax resident (spending at least 183 days per year in the UAE)
- Establish genuine business operations in Dubai
- Make key business decisions from the UAE
- Become a UK non-resident under the Statutory Residence Test
This isn't a holiday - it's a genuine life change requiring commitment.
2. Split Your Operations
If your business genuinely operates internationally:
- Keep UK operations in a UK company (paying UK Corporation Tax on UK profits)
- Establish real UAE operations in a Dubai company (benefiting from UAE rates on UAE activities)
- Ensure both have genuine substance and commercial purpose
UK Income Still Gets Taxed
Even if you successfully relocate, you'd still have UK tax obligations on UK-sourced income:
- Rental income from UK properties
- Trading income from UK customers
- Capital gains from UK assets
- Employment income from UK companies
There's no escaping UK tax on UK income, regardless of where you live.
The Costs of Getting It Wrong
HMRC has become increasingly sophisticated in spotting arrangements without genuine substance. Get caught and you could face:
- Backdated UK Corporation Tax on all profits
- Interest and penalties on unpaid taxes
- Expensive HMRC investigations
- Potential criminal charges in extreme cases
We've seen entrepreneurs face five-figure bills for taxes they thought they'd avoided.
The UAE Isn't Tax-Free Anymore
The UAE introduced Corporate Tax in June 2023. Whilst the 9% rate on profits above AED 375,000 (roughly £80,000) is still attractive, it's no longer completely tax-free.
What We Actually Recommend
Before considering international structures:
- Get specialist advice first - Don't rely on what you've heard from mates or read online
- Be genuinely committed to moving - Half-hearted relocations rarely work
- Understand the full costs - UAE setup, ongoing compliance, potential loss of UK allowances
- Plan for real substance - Your overseas operations need genuine commercial activity
How You Can Move to Dubai
At Capture Accounting, we work with content creators and entrepreneurs considering genuine moves to Dubai. We provide:
- Honest assessments of whether Dubai makes sense for your situation
- Tax residency planning for individuals and companies
- Proper Dubai company formation with real substance
- UK exit strategies to ensure clean breaks from UK tax
- Ongoing compliance in both jurisdictions
We have offices in both the UK and Dubai, so we understand both systems and the practical realities of international business.
Conclusion
Setting up a Dubai company whilst staying in the UK isn't a tax strategy - it's a recipe for trouble with HMRC. The UK has sophisticated anti-avoidance rules designed to catch exactly these arrangements.
If you're serious about Dubai, it requires genuine relocation and real business substance overseas. There are no shortcuts that let you keep living in the UK whilst avoiding UK taxes. Any international planning must be done properly, with a full understanding of both jurisdictions' rules.
If you’re considering Dubai, we can provide an honest assessment of whether it's a good fit for your situation. Book a tax residency consultation with us, and we can genuinely do it right.
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Meet Reza
Reza is the Founder of Capture Accounting and also a content creator himself. He spends most of his time coaching and mentoring other accounting firm owners to build more profitable firms and do better for clients. You'll find him very active on LinkedIn.
