foreign contracting in UK - what visa covers it?

[johndoeyu]

Hello,

I'm an IT freelancer (programmer) from Serbia - I need visa to come to UK. And there is a chance that I might be accepted for a contracting job in the UK.

There are a couple of things I don't quite understand.

What is the difference between employment and contracting and difference it makes when it comes to taxes and visa?

Right now I'm contracting for another UK based company, but working from Serbia. And I as a business (sole trader) have contracting agreement with the company. Each month I send an invoice stating "contracting services for _month_ _year_".

I understand that with contracting you don't get pension, health ...etc paid by the employing company.

What's not clear to me:
* In UK, does contracting always happen between two business entities, or can one be a person - and what is the "standard" if it can be both?
* Are there any differences when it say comes to paying taxes and such?

In Serbia it can be both - but fees are larger for person-2-business than business-2-business. Because for person-2-business, you need to pay ~40% on top of the contracted sum for state taxes (pension, health ...etc.), and for business-2-business nothing extra but whatever the taxes/fees the two business are already paying - which is usually much less for long term contracting.

So hence in Serbia for project or such (one time thing) it's usually person-2-business (unless the service provider already has a business set up). And b2b for anything longer.


Does Tier 5 visa (temporary worker - international agreement) cover contracting like these?

Would it still mean that I can as a business entity from foreign country, contract for UK based business, or due to sponsorship visa requirements I would need to contract as a person or (what wouldn't work for UK company I think) be employed by it?


What I'm worried about is that if I contract as a person for UK based company, I might need to pay some taxes or other UK government fees - but if I'm contracting as foreign business, money would go to another country, and hence I would only pay taxes there - which would be basically none since it's considered export of services which is tax free - of course there are other fees/taxes for running the business


I believe that general business visa would not cover contracting as I would need to provide service (programming) on site in UK - but maybe I'm mistaken?


Why is the Tier5 visa so much "relaxed" in terms of requirements compared to Tier1 and Tier2?

IMHO it seems that only difference (not in requirements - but the outcome) is that with Tier1/2 after X years in the UK, you can apply for citizenship, which you can't with Tier5.


Thanks!

[SueEllen]

1. Most of the information about contracting in the UK can be found on the First Timers guide. (Look under the CUK Navigation box on your RHS --->)

2. In the UK working in IT you have to be a company to have a business contract with another company. (Other industries are different.) This company can either be your own limited or an umbrella company. This is so the company hiring your services doesn't get slammed by HMRC with tax and NI payments from using you.

3. If you are staying in the UK over 6 months then there is absolutely no legal way you will get out of paying taxes in this country as a company.

4. I can't answer your visa questions but Tier 2 (Intra-company transfers ) is the most usual way foreign nations can get into this country.

[lxt04]

Talk to an immigration lawyer, and then talk to an accountant.

If you're asking complex questions relation to immigration here, you're setting yourself up for disaster. A lot of the assumptions you're making are way off the mark - the assumptions you're making about Tier 5 visas are completely wrong, and you absolutely need to talk to someone expert in immigration issues. This is clearly going to cost you some money, since good advice never comes for free...

[nfoote]

I'm foreign

I know it doesn't 100% apply to your situation but I'm from New Zealand and am working as a IT Contractor in the UK under a General Tier 1 visa.

Another thing to think about is that when I first got here I had a lot of companies wanting me to contract through them (ie I think they were umbrella like companies) and they would help me claim EVERYTHING as expenses, ALL food, ALL accomodation AND flights to and from New Zealand on the other side of the planet. All because they would spin it that my home was still NZ and that I am only here to work as a contractor brought in from NZ, so everything I did here would be a direct business expense.

Unfortunately I went and did a dumb thing like get a permie job. Even though I've now seen the light and gone contracting I'm not up for any such schemes any more cos of that black permie stain on my record!

Food for thought.

[Wanderer]

What's not clear to me:
* In UK, does contracting always happen between two business entities, or can one be a person - and what is the "standard" if it can be both?

The company (or agency) will probably not allow you to do business with them as sole trader so you will most likely have to form a limited company or go via an "Umbrella company". That's what the majority of us here do.

Umbrella is easiest, least admin and not too complex but you will pay a lot more tax than you would if you work through a Limited Company (presuming you are outside IR35 - see the link to "Legal : IR35" for more about this minefield tax rule).

If you are only going to be here 6 months then I'd suggest an umbrella because it's the simplest solution. If you are going to be making a lot of money > 400 / day then it might pay to go with the Limited Company, even with the extra running costs and hassle.

Sorry, I can't comment on the Immigration law - it's been years since I had to deal with those guys. Generally speaking though, I would have thought that if you have the right to work in the UK, and it's not tied to one particular (sponsor) company, then you are free to setup a LTD company or umbrella and do as you please.

Good luck!

[stek]

You will need a Tier 1 (for which you need Masters Degree) or a Tier 2 (for which you will need to be sponsored by a licenced employer). Tier 5 is not appropriate, it was the Working Holiday Maker visa, for Commonwealth citizens only, now the Youth Mobility Scheme, only open to certain countries, of which Serbia isn't one. There are other Tier 5 visa but they don't apply here.

[cojak]

Commonwealth Member = a country that used to be ruled directly or indirectly by Great Britain...

[nfoote]

You will need a Tier 1 (for which you need Masters Degree)

Not so as of the 6th of April. It has reverted to just a Bachelors Degree, BUT the previous earnings requirement has increased almost 2 fold, which in my view actually makes it harder to obtain.

Although those earning massive amounts (150,000GBP plus) no longer require ANY qualifications!

[SueEllen]

Not so as of the 6th of April. It has reverted to just a Bachelors Degree, BUT the previous earnings requirement has increased almost 2 fold, which in my view actually makes it harder to obtain.

Although those earning massive amounts (150,000GBP plus) no longer require ANY qualifications!

So those who the government can tax loads get visas easier.

[Wanderer]

Why is the Tier5 visa so much "relaxed" in terms of requirements compared to Tier1 and Tier2?

Ahh, I see what this is now. What's called "Tier5" is what thousands of Kiwis and Aussies used to call a "Working Holiday Visa". Come to the UK, work hard, party hard, do some travelling around Europe then bugger off back home after 2 years.

The requirements are relaxed because many of the countries who qualify under this arrangement (New Zealand, Australia, Canada) have strong historical and cultural connections with the United Kingdom. I think in recent years, these countries have set up reciprocal agreements with the UK too which is only fair. It's a kind of a rite of passage for many people.

Technically, you are only supposed to take work which is "incidental to your holiday" but in reality they aren't organised enough to enforce this. If they ask at immigration then you just have to tell them you are working in a pub for minimum wage and they are happy.