Billing my overseas client from outside UK...Tax free country

[NoviceContractor]

Hi All,

I am working from Home. I am moving to a Mexican client next month. I have a limited company in UK at the moment and billing agency/client via this limited company.
My question is - why do I have to bill my agency/ client via a UK based Limited Company? Can I not open a company in one of the Low Tax locations and bill the agency and client via that company?

I am sure people would have thought/ tried this already. I just want to understand what am I missing that stops this as a working practice among contractors?

Thanks,

[Fred Bloggs]

I think the flaw in the plan is that you are living and working in the UK. As a UK tax paying citizen you are taxed on your world wide income. If you fancy hiding it in Panama or where ever and not declaring it, then that is your choice. I do not think anyone here would condone that kind of action.

[cojak]

I believe your plan is called tax evasion. Google it to find out more...

[NotAllThere]

Tax is due where the work is done, no matter where your company is based. Usually UK agencies won't work with non-UK companies, because the tax liability would fall to them in the event of a your company defaulting. If you were working through a non-UK agency, or direct, you might get away with it - but it would, nonetheless be tax evasion (I'd guess).

Just cough up like the rest of us.

[BlasterBates]

I can try to secure work from US based agencies too in which case they would not mind (I guess) where the company is located as long as I am doing the work. Moreover, I am in a position where I may have 2 part time contracts at the same time. I can bill one of my client from UK and another one from a company that is in tax haven. Which law in UK stops a contractor not to work for a company based in Panama (for example)? I would be ultimately working for a company based in Panama and delivering my services to clients globally. It may sound tax evasion but there can be genuine case where a worker is working for a overseas company from UK. I am looking for any specific example where it has been caught by HMRC as tax evasion or any law in UK that prevents such practice. Any pointers?

Thanks.

Nope, if you want to bill through a company in Panama you have to be physically there in Panama.

Your business is where you work not where you bill through, otherwise everyone would set up their companies in Panama.

https://www.gov.uk/government/public...a-tax-treaties

[Maslins]

Nope, if you want to bill through a company in Panama you have to be physically there in Panama.

Your business is where you work not where you bill through, otherwise everyone would set up their companies in Panama.

https://www.gov.uk/government/public...a-tax-treaties

Pretty much this. A Ltd Co can be tax resident in the UK either because it's incorporated here, or because the central management and control is here. This is why 5 or so years ago you'd often hear on the news that some big bank was threatening to move its head office to Ireland. They couldn't just decide that their business was now Irish, they had to actually move significant chunks of the business there to get the tax treatment they wanted.

If you live and work predominantly from the UK, your company (whether incorporated in Panama or wherever) has its management and control here. Therefore it's liable to corporation tax here. If you live here, you're liable to personal tax here.

If you go down the "yeah but how would they know" route then that's tax evasion.

[SueEllen]

Of course, I am taxed on my world wide income but if I am working for a Panama based company then the only tax I will be liable to pay is not the daily rate the Panama based company is billing to the client but the money that I get as salary. What flaw do you see in it? Panama based companies have no owners and its impossible prove that the company in Panama belongs to you.

On a more genuine note, what stops a contractor to open a company in a country that is more tax friendly and grow and run the business from that country? You can of course be running this business from your home in UK but ultimately that company is not registered in UK.


P.S. - Panama is just an example. The company can be opened in one of the countries where the CT is very low or none, i.e. Dubai.

It's been explained to you more than once if you live and work in the UK regardless of where your clients are based you pay tax here.

If you want to try and evade tax then choose a scheme. However expect HMRC to come after you in a few years.

[MrMarkyMark]

I can try to secure work from US based agencies too in which case they would not mind (I guess) where the company is located as long as I am doing the work. Moreover, I am in a position where I may have 2 part time contracts at the same time. I can bill one of my client from UK and another one from a company that is in tax haven. Which law in UK stops a contractor not to work for a company based in Panama (for example)? I would be ultimately working for a company based in Panama and delivering my services to clients globally. It may sound tax evasion but there can be genuine case where a worker is working for a overseas company from UK. I am looking for any specific example where it has been caught by HMRC as tax evasion or any law in UK that prevents such practice. Any pointers?

Thanks.

If it looks like a dog and barks like a dog....

Guess what it is?

[Fred Bloggs]

Of course, I am taxed on my world wide income but if I am working for a Panama based company then the only tax I will be liable to pay is not the daily rate the Panama based company is billing to the client but the money that I get as salary. What flaw do you see in it? Panama based companies have no owners and its impossible prove that the company in Panama belongs to you.

On a more genuine note, what stops a contractor to open a company in a country that is more tax friendly and grow and run the business from that country? You can of course be running this business from your home in UK but ultimately that company is not registered in UK.


P.S. - Panama is just an example. The company can be opened in one of the countries where the CT is very low or none, i.e. Dubai.

Well, there you have it then. Go right ahead, I mean, what could possibly go wrong with your Emirati or Panamanian company? Fill your boots, I'd say.

[stek]

Of course, I am taxed on my world wide income but if I am working for a Panama based company then the only tax I will be liable to pay is not the daily rate the Panama based company is billing to the client but the money that I get as salary. What flaw do you see in it? Panama based companies have no owners and its impossible prove that the company in Panama belongs to you.

On a more genuine note, what stops a contractor to open a company in a country that is more tax friendly and grow and run the business from that country? You can of course be running this business from your home in UK but ultimately that company is not registered in UK.


P.S. - Panama is just an example. The company can be opened in one of the countries where the CT is very low or none, i.e. Dubai.

Some things;

1. Tax is due where the work in done, if you are in Panama, tax is due in Panama, if you are in UK, tax is due in UK. Note it's pretty difficult not to be tax resident resident in UK, read the HRT section on HMRC's website. So you even working mostly in Panama you would be most likely domiciled in UK for tax too.

2. For a one-man co., the co generally follows the main employee/director for tax etc.

3. The stakes are extremely high, get it wrong (and you will) and you'll be torn a new one by HMRC.

4. You don't really have a clue on this I'm afraid, it's a total non-starter.