New to contracting - oversea client - in/out IR35 - umbrella/ltd - uk/europe

[0xsrwea31]

Hi everyone! I'd like to ask you for some help to make the best decision. Here's my situation:

1. Currently working as perm
2. The client I'd be contracting for is based in the US (which is why they can only hire me as a contractor in the UK)
3. They don't have a clue of what inside/outside IR35 means
4. I'd be working with all the benefits of a full-time employee except for health insurance and pension (even receiving holidays, equity etc)

I've never done any contract jobs before and I wanted your opinion on whether:

1. The contract can be considered outside IR35 since they're not based in the UK (despite receiving benefits)
2. If I need to be inside, should I just go for an umbrella solution? I've read LTD can be even more expensive than that when working inside IR35
3. Since they are not based in the UK, I could potentially evaluate the idea of moving abroad and working from there. Does anyone have any suggestions/experience on where this would be beneficial from a tax perspective?

Thanks in advance for your help!

[NotAllThere]

What countries are you allowed to live and work in?

[jamesbrown]

The client being outside the UK does not mean the contract is outside IR35, it simply means that you’re under the old Chapter 8 rules and need to make the assessment yourself (assuming the company has no UK office/PE). While it is quite hard to have overseas contracts that are inside IR35, it sounds like this one is essentially an employment, so inside.

Your options are to use an umbrella, use a DPNI PAYE direct scheme that you set up via HMRC (full PAYE and EeNI, no ErNI) or to be a sole trader. However, the latter creates different risks for both you and the client.

[0xsrwea31]

What countries are you allowed to live and work in?

All European countries plus they might be able to sponsor the US visa after 3 months of working with them.

Your options are to use an umbrella, use a DPNI PAYE direct scheme that you set up via HMRC (full PAYE and EeNI, no ErNI)

What's the difference between the two? What's your recommendation/experience?

[jamesbrown]

What's the difference between the two? What's your recommendation/experience?

The difference is that you’ll pay more tax via an umbrella employment, but you’ll have less hassle. The DPNI route is pretty niche, typically used by staff in foreign embassies and the like.

[northernladuk]

Use the google forum search. In google type <keywords> site:forums.contractoruk.com

We've 100s of threads about contracting in the UK for a US client.

[0xsrwea31]

The difference is that you’ll pay more tax via an umbrella employment, but you’ll have less hassle. The DPNI route is pretty niche, typically used by staff in foreign embassies and the like.

Would you be able to quantify the difference between the two? I'd like to understand if the DPNI route is worth researching.

We've 100s of threads about contracting in the UK for a US client.

I searched but I found just a couple of threads. Maybe you could point me in the right direction?



Another question I have is how to handle benefits like gym reimbursement etc. as I wouldn't want to pay taxes on those if possible.

Also, I've been told that another solution might be to register as a sole trader but I'm not sure there are any tax benefits going this route.

[jamesbrown]

Would you be able to quantify the difference between the two? I'd like to understand if the DPNI route is worth researching.

As I mentioned above, the main difference is the Employer's NI, (13.8%) which you won't pay via a DPNI scheme (overseas employer). You will also pay the apprenticeship levy through an umbrella, but that is relatively small (0.5%).

Also, I've been told that another solution might be to register as a sole trader but I'm not sure there are any tax benefits going this route.

I also mentioned this in my first post. Indeed, if you call HMRC about the DPNI scheme, they will try to force you down this route instead, most likely. Anyway, yes, this will be more tax efficient than an umbrella, but you also carry personal liability and I wouldn't do that under any circumstances with a US "client" (they are litigious). Plus, if this is really an employment relationship (and it sounds like it is), then the client is potentially liable for underpaid taxes in that scenario (realistically, they may not be, but it creates a risk that the client may not want).

[0xsrwea31]

this will be more tax efficient than an umbrella, but you also carry personal liability and I wouldn't do that under any circumstances with a US "client" (they are litigious)

Sorry for the ignorance, but what does this mean in practice? What's the risk you describe as 'personal liability'? Would you be able to make some examples?

[jamesbrown]

Sorry for the ignorance, but what does this mean in practice? What's the risk you describe as 'personal liability'? Would you be able to make some examples?

You make a significant mistake, client considers you liable, client brings a legal case in the relevant jurisdiction, you lose, which means you probably lose everything, house, everything. In other words, limited liability means something. I only deal with US clients through my company and with all relevant insurance in place for the jurisdiction in which the contract is written.