Contracting in UK whilst becoming tax resident abroad

[Rita]

Hello,

I’m new here so please bear with me and let me know if there is anything missing.

I am a contractor operating via a UK based limited company, and all my clients are also based in the UK. However I’m considering moving to Colombia, where I would like to continue working remotely with the same clients. I do not intend to work with clients based in Colombia at the moment. The plan would be to remain in Colombia for more than 6 months, therefore becoming a tax resident of Colombia. I know that the UK has a dual-tax agreement with Colombia, but I’m not sure how that works in practice.

Assuming that my clients are happy to continue our relationship with me working remotely, I’m trying to understand what the tax implications would be. I’ve tried looking online for the answers, but can’t seem to find anything that helps, so would really appreciate any advice with the following questions/assumptions.

1. I would like to continue invoicing clients via my UK ltd company, as for some this is a requirement.
2. Given that both my ltd company and clients are UK based, would I continue to pay corporation tax in the UK? Despite my physical location being in Colombia.
3. Would it make a difference if I only performed the work whilst physically in the UK, but was still a tax resident of Colombia?
4. For my personal income tax, being a tax resident of Colombia they will want to tax my worldwide income, however even if I am a non-resident in the UK, they will still want to tax my UK based income (from my limited company), therefore with the dual-tax agreement who should I pay the tax to?
5. Are there any other considerations/options that I’ve totally missed?

Note: I’m not looking to avoid any tax, my main concern is to make sure I am meeting the legal requirements of both countries, whilst continuing to work with my existing clients.

[lecyclist]

2. Yes - Corporation tax will be owed on any profits after salaries, expenses and other deductions, before dividend payments.
3. UK tax residency is "sticky": easy to get, difficult to lose. Unless you are living for a significant period of the year in Colombia, you will continue to be UK tax resident. If you are also classed as being Colombian tax resident, you will have dual residency. I would say in the short term it does not make a difference. IANATL. RDR3: Statutory Residence Test (SRT) notes - GOV.UK.
4. The norm is to pay tax where the work is conducted.
5. See the generic notes below.

There are a number of similar threads covering similar subjects. I'll provide the generic overview.

1. When working with UK clients /UK agencies, you will find most of them prefer (or insist) on dealing B2B with UK companies.
2. There are so many tax advantages to keep a UK company operating, especially for non-UK tax residents. For example, while living in Colombia you could be paying yourself a tax free UK salary of £12,500 per annum, taking £2000 in dividends tax free, and paying dividend tax at 7.5% (+19% CIT) up to your basic rate tax band limit (currently £50K) on the remaining £35,500 from your basic tax allowance. You would need to check Colombian tax law, and depending on your personal circumstances (or your appetite for risk.. Colombia became an OECD member in 2020) you may need to pay a top-up tax locally.
3. You would be maintaining your eligibility for a UK state pension, assuming you may want to return to UK/ benefit from a state pension in the future.
4. When you do start operating in Colombia using your Colombian company, there would be transfer pricing opportunities from UK->Colombia that your local accountant could inform you about. Essentially, by applying a little intelligence, you could determine the frequency, quantity and timing of B2B transfers between UK->Colombia, that most benefits your specific requirements.

[northernladuk]

There is working abroad and there is a working abroad with a 5 hour time difference. Gotta be a damn good client to be OK with that. What happens if your gig evaporates?

[Lance]

5) Are there any other considerations/options that I’ve totally missed?

Whether any agreements are in place with regard to export of services from Colombia to UK after Jan 1st?
Tariffs? Customs?
I don't know but the questions are missing from your list so I assume you don't know either.

If of course you are in the UK while you work then cross-border trade isn't relevant, but tax residency will remain in the UK and I assume that's not what you intend.

[BlasterBates]

If you are working in Colombia remotely then in effect you are running a business in Colombia, this means they will expect you to register there and pay tax either as a Colombian company or as self-employed. This is no different than if you were to work in the UK for a foreign company whilst living in the UK. If you're intention is to settle permanently in Colombia then I would suggest you visit a tax advisor there.

Once you have been in Colombia for 6 months you will be obliged to submit a tax return and you will be obliged to declare your UK earnings regardless of whether they've been taxed in the UK. If it is your only income it is likely that they will enquire further as to why these earnings are being taxed in the UK when you're living in Colombia. If they find you've been working remotely in Colombia they will probably tax you without taking into account UK tax.

Tax is liable depending on where you physically do the work, not the nationality of the company you work through or the location of the customer.

One way around the problem would be to invoice your UK Ltd from Colombia so most of the profits and earnings are there. You will also need advice from a UK accountant. Perhaps he could arrange for another company to act as an intermediary. If you can find a seperate company not owned by you in the UK to act as an intermediary that probably would be the simplest solution.

The double taxation treaty covers a company operating in two countries and it states that the profit should be apportioned according to amount of business. The fact that all the work will be done in Colombia and the UK is only acting as an intermediary I would expect that most profit should be in Colombia. Your accountants should be able to advise on that.