Yes, You Can Keep Both Companies Open. But the Structure Matters.
The short answer is yes. You can keep your UK company open while running a Dubai agency. Many agency founders do exactly this. They have existing retainer contracts, long-term client relationships, or a UK team they don't want to disrupt. Shutting down the UK entity and starting fresh in Dubai would mean renegotiating contracts, losing trading history, and potentially triggering early exit taxes.
But keeping both companies open creates a cross-border structure. And that structure comes with three specific risks: double taxation, transfer pricing adjustments, and permanent establishment (PE) claims. Each of these can cost you thousands if you don't plan for them upfront.
As specialist agency accountants working with agency founders in both the UK and UAE, we see this scenario regularly. A founder moves to Dubai, sets up a new agency there, but keeps the UK company ticking over. The UK company subcontracts work to the Dubai company. Or the founder takes a salary from both. Or the UK company invoices clients and the founder withdraws the cash in Dubai. Each of these creates a different tax outcome.
Let's work through what actually happens, with real numbers and real examples.
The Core Problem: Where Is the Business Being Managed?
HMRC looks at where a company is "centrally managed and controlled." If you are in Dubai making the day-to-day decisions for the UK company, HMRC can argue that the UK company is effectively managed from Dubai. That triggers a permanent establishment in the UAE. And if the UK company has a PE in the UAE, the UAE can tax the UK company's profits attributable to that PE.
But here is the twist: the UAE has no corporate income tax (for most businesses). So a PE in the UAE might not actually create a UAE tax charge. What it does is shift the UK company's tax residence argument. HMRC can argue the UK company is now UAE-resident. That changes everything.
In practice, most agency founders keep their UK company UK-resident by ensuring board meetings happen in the UK, key decisions are made in the UK, and the UK company retains its own bank accounts, contracts, and operational independence. If you are the only director and you are living in Dubai, this becomes harder to prove.
Transfer Pricing: The Most Common Trip Point
Here is where most founders get caught. You have a UK company with a 12-person team billing £800k per year. You move to Dubai and set up a new agency. The UK company starts subcontracting work to the Dubai company. Maybe the Dubai company charges the UK company £200k for "services" in year one.
HMRC will ask: is that £200k at arm's length? If the Dubai company is charging more than an independent third party would charge, HMRC can adjust the UK company's profits. That means more corporation tax in the UK. And if the Dubai company is charging less than market rate, the Dubai company might be under-reporting its own profits.
The arm's length principle is straightforward: the price between connected companies must be the same as if they were independent. If your Dubai agency charges your UK company £150 per hour for a service that a UK freelancer would charge £75 per hour, HMRC will challenge it. Similarly, if you charge £40 per hour when the market rate is £75, the Dubai company is effectively giving value to the UK company. That is a transfer of value, and HMRC can tax it.
You need a formal transfer pricing policy. It doesn't need to be a 50-page document, but it needs to justify the pricing. Benchmark against comparable services. Document the rationale. Keep it in your records. If HMRC asks, you show your working.
Permanent Establishment Risk: When Does Your UK Company Have a Dubai Presence?
If you are living in Dubai and running the UK company from there, HMRC can argue that the UK company has a permanent establishment in the UAE. A PE is essentially a fixed place of business. A home office counts. A co-working space counts. A regular meeting point counts.
But here is the practical reality for most agency founders: you are not operating a fixed place of business for the UK company in Dubai. You are operating a separate Dubai agency. The UK company exists on paper, with a UK registered office, UK bank account, and UK clients. You check emails from Dubai, but the UK company's operations are carried out by your UK team.
HMRC's guidance on PE is detailed. A PE exists if the UK company has a fixed place in the UAE through which its business is wholly or partly carried on. If you are the only person doing the UK company's work and you are in Dubai, that is a PE. If you have a UK team doing the work and you are just overseeing from Dubai, it is less clear-cut.
The safest approach: ensure the UK company has genuine operational substance in the UK. A UK team. A UK office (even a serviced office). UK bank accounts. UK client contracts signed from the UK. If the UK company is a shell with no UK activity, HMRC will reclassify it.
Double Taxation: The UK-UAE Double Tax Treaty
The UK and UAE have a double tax treaty. It prevents the same income being taxed twice. But it only works if you structure correctly.
Under the treaty, business profits are taxable in the country where the company is resident. If your UK company is UK-resident, its profits are taxed in the UK. If the UK company has a PE in the UAE, the UAE can tax the profits attributable to that PE. The UK then gives double tax relief for the UAE tax paid.
But the UAE has no corporate income tax. So there is no UAE tax to claim relief against. The result: the UK company pays UK corporation tax on all its profits, regardless of where the work is done. The Dubai agency pays no corporate tax on its own profits (for now). But the Dubai agency's profits are separate from the UK company's profits.
The double tax treaty also covers dividends, interest, and royalties. If your UK company pays dividends to you as a UAE resident, the UK charges withholding tax. Under the treaty, the withholding rate is typically 0% for individuals holding at least 10% of the shares. But you need to claim this relief through a form DT-Individual or DT-Company.
Most founders we work with end up in a simple position: the UK company pays UK corporation tax on its own profits. The Dubai agency pays no corporate tax. The founder takes a salary from the Dubai agency and dividends from the UK company. The UK dividends are taxed in the UK (at 10.75%, 35.75%, or 39.35% depending on your tax band). The Dubai salary is taxed in the UAE (at 0%). No double taxation arises, because the two companies are separate legal entities with separate income streams.
How to Structure It: A Worked Example
Let's use a real scenario. You own a 15-person digital agency in Shoreditch, billing £1.2m per year. You move to Dubai Marina. You set up a new Dubai agency. You keep the UK company open.
Year one structure:
- UK company retains 10 UK staff, billing £800k from existing UK clients.
- Dubai agency hires 5 staff in Dubai, billing £400k from new UAE clients.
- UK company subcontracts £100k of work to the Dubai agency (at arm's length pricing).
- You take a £12,570 salary from the UK company (up to NI threshold).
- You take a £60,000 salary from the Dubai agency (tax-free in UAE).
- UK company pays you £50,000 in dividends (UK dividend tax at 35.75% if you are a higher rate taxpayer).
Tax outcome:
- UK company pays 19% corporation tax on £700k profit (after costs) = £133k.
- Dubai agency pays 0% corporate tax on £200k profit.
- Your UK dividend tax: £50,000 at 35.75% = £17,875 (after £500 dividend allowance).
- Your UAE salary: £60,000 at 0% = £0.
- Total tax: £150,875 on combined profits of £900k. Effective rate: 16.8%.
If you had kept everything in the UK, you would pay 25% corporation tax on £900k = £225k, plus dividend tax on withdrawals. The Dubai structure saves you roughly £75k per year in tax. But only if you manage transfer pricing and PE risk correctly.
What Happens When You Sell the UK Company?
If you sell your UK company while living in Dubai, Business Asset Disposal Relief (BADR) applies. BADR gives you a 14% CGT rate on the first £1m of gains for disposals 6 April 2025 to 5 April 2026 (18% from 6 April 2026). But you must meet the qualifying conditions: you must be an officer or employee of the company, hold at least 5% of the shares, and have held them for at least 2 years.
If you are a UAE resident when you sell, the UK still taxes the gain. The UK-UAE double tax treaty allocates taxing rights on capital gains to the country where the company is resident. If the UK company is UK-resident, the UK taxes the gain. You then claim relief in the UAE (which has no CGT, so no double taxation).
One complication: if you have moved your personal tax residence to the UAE, you might be tempted to argue the gain is not UK-taxable. It is. The UK taxes capital gains on UK-resident companies regardless of where the shareholder lives. The gain is taxed in your hands as an individual, and your residence matters for the rate. If you are non-UK resident, you only pay UK CGT on UK residential property. Shares in a UK company are not UK residential property. So if you are non-UK resident, you pay no UK CGT on the sale. But this only works if you are genuinely non-UK resident (spending fewer than 183 days in the UK per year, and not having a UK home).
Practical Steps to Avoid Problems
Here is what we tell our clients who want to keep their UK company open while running a Dubai agency:
- Separate the companies legally. Different bank accounts, different contracts, different client lists. No commingling of funds.
- Document transfer pricing. Get a benchmark report for any cross-charges between the UK and Dubai companies. Keep it simple but defensible.
- Maintain UK substance. Keep a UK team, a UK office, and UK client contracts. Do not let the UK company become a shell.
- Watch your personal tax residence. If you spend more than 183 days in the UK, you are UK resident. That means worldwide income is taxable in the UK. The Dubai structure only works if you are genuinely non-UK resident.
- Use a holding company. If you own both the UK and Dubai companies through a holding company, you can route dividends cleanly and protect assets. This is especially useful if you plan to sell either company later.
- Review your director's loan account. If you owe money to the UK company and you are in Dubai, the loan is still taxable. S455 tax at 35.75% applies if the loan is not repaid within 9 months of the year end.
We work with agency founders who operate in both the UK and UAE. If your contractor mix has changed or you are planning a move, ask your accountant before year-end. The structure needs to be set up before you leave, not after.
Common Mistakes Founders Make
I see the same errors repeatedly. Here are the three biggest:
Mistake 1: Assuming the UK company can be dormant. If your UK company has any income, it is not dormant. It must file corporation tax returns and annual accounts. If it has no income but you are keeping it open for future contracts, it is still active. File dormant accounts only if there is genuinely no activity.
Mistake 2: Paying yourself from both companies without thinking about tax. Your UK salary and dividends are UK-taxable. Your UAE salary is not. But if you take too much from the UK company, you push yourself into higher rate tax bands. Plan your withdrawals to stay within basic rate if possible.
Mistake 3: Ignoring VAT. If your UK company's turnover exceeds £90,000, it must be VAT registered. If you are supplying services to UAE clients from the UK company, you need to understand place of supply rules. Services to UAE businesses are typically outside the scope of UK VAT. But services to UAE consumers are not. Get advice on this before you invoice.
For more detail on how we help agency founders with cross-border structures, see our services page. We also work specifically with digital agencies and marketing agencies who operate internationally.
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