Contracting with UK LTD abroad: Agency or subcontracting

[m0n1k3r]

It is much faster and simple to setup and European customers are quite pleased to work with a UK company for their market research in third world countries (vs. some african or arab one or even an IBC in an offshore location).

Just be aware of that that perception might change post March 2019.

You might want to look at setting up a company in Estonia, owned by your IBC or by yourself. There is a 20% corporation tax, but it is only levied when the company declares a dividend. Working capital is not taxed. You will have a proper limited company in an EU country in the eurozone and the Schengen area.

https://e-resident.gov.ee

[yannis]

Just be aware of that that perception might change post March 2019.

You might want to look at setting up a company in Estonia, owned by your IBC or by yourself. There is a 20% corporation tax, but it is only levied when the company declares a dividend. Working capital is not taxed. You will have a proper limited company in an EU country in the eurozone and the Schengen area.

https://e-resident.gov.ee

0
thanks for the suggestion. Indeed I am looking at alternatives for the future post Brexit if it happens

For now though we are mostly settled into the UK path.

The basic issue though is the following: does HRMC question outsourced work to offshore companies? Meaning that we will have to be having invoices, evtl get individual invoices questioned etc. Possible to do but the admin! Or does this work without issues?

If not then it would be better a blanket agency agreement, 10% is kept in the UK, taxes are paid on it and all the overhead costs of management the construct are gone. Unless those agreement are often put into question again, then it would be "easier" to justify the payments based on actual invoices and hourly rates...

Technically both schemes work and are legit. But asking whats the experience with HRMC if any around here on inspections etc. Trying to minimize admin burden.

[WTFH]

Technically both schemes work and are legit. But asking whats the experience with HRMC if any around here on inspections etc. Trying to minimize admin burden.

Using a scheme ind getting involved with HMRC is a bad idea. No ifs, no buts.

The "admin burden" might be marginally less on your setup, but the longer term pain won't be worth it.
You might want to get professional help from an accountant, and go through all the facts with them, keeping your mind open that the idea of using the UK as a tax dodge is most likely not a smart one.

[northernladyuk]

Hello,

I am a non UK resident / national etc (with no previous links to the UK). I have an LTD for consulting with other non UK companies (eg European). Currently a significant part of the work is carried in countries with no income tax.

To manage offshore expenses and pay employees abroad we are considering:

a) Setup an offshore IBC with an Agency contract with the LTD, the LTD keeps 10% of turnover and passes over 90%. From there the IBC can pay the employees. If employees on a taxable country IBC takes care of withholding taxes or hires through a local umbrella in destination country for the duration of engagement.

b) Setup the offshore IBC as a sub-contractor umbrella, invoicing the LTD on an hourly rate for the hours used on the projects. IBC then pays the employees. If employees on a taxable country IBC takes care of withholding taxes or hires through a local umbrella in destination country for the duration of engagement.

c) Pay directly the employees out of the UK payroll on gross basis either as employees or self-employeed. But there seem to be different views on this as seems HRMC is not definitive on process and lack of NIC etc and seems somehow of a fuzyy method (eg. payment to foreign directors)

In all cases the company will not be trading with UK entities nor will employ any UK resident/nationals.

The (a) scheme is discussed a lot, suggesting a min of 10% profit for the agency company. Is that scheme better than (b) in any way? Better than (c)

Thanks for your support!

You need proper professional advice, not some opinions from us lot. I mean this in a helpful way as your business model is more complex than most of ours.