Residing in Germany, but contracting in the UK.... can I claim airfares and rent

[ClackettLane]

Ok so the situation is I am currently in the UK but going to move to Germany with my girlfriend.

I will be keeping my existing contract here in the UK and working a combination of 'from home' and 'on site', basically 2 days at home and 3 days on site (on average).

So I will be flying to the UK every week.

Am I right in thinking that if I become a resident in Germany and pay their taxman I am entitled to claim airfares and the cost of renting a property over here?

And am I also right in thinking that I would not be entitled to claim airfares/rent if I was a resident here in the UK for tax purposes.

One final question. This 183 day rule for residency purposes, am I right in thinking that a 'day' is wherever you are at 11:59pm on each particular day?

[BlasterBates]

You will actually end up being tax resident in both countries.

This is complicated.

If you were to work only in the UK and go back to Germany at the weekend it would be simple, you would tax your earnings in the UK and then declare this on the German tax form where some of your income (dividends) would be subject to a top up tax.

The fact that you work some sof the time in Germany means you should do the following.

Approach a tax consultant in Germany and arrange to be a freiberufler, just send a VAT form in every month, and charge your time in Germany to your UK Ltd company. Of course there would be some flexibility as to what your German rate is.

Your UK company will be taxed in the UK and your Freelance work in Germany.

Anything else is liable to be challenged by either tax authority.

Of course you can take a risk and just tax your contract earnings in the UK, and you could resaonably argue you did all the work in the UK.

Just beware when tax authorities find out you have been working in their jurisdiction on a longterm basis they want their money. Personally I would keep everything above board. Whatever happens you have to do UK and German tax returns anyway so why take even a small risk.

Once you have it all setup it becomes automatic.

But better have some admin. up front with the knowledge that it is all above board rather than finding out the hard way, when some German official decides to sniff around.

If you were to work in the UK but tax everything in Germany then HMRC might take offence. It works both ways. In fact if you're billing a UK agency I can't see how you could do this without paying UK VAT anyway.

The tax authorities will expect you to divide your earnings between the two countries, even though this sounds like a headache this is how it should be done. This is all described in the Double Taxation treaty by the way.

You don't save tax by taxing everything in one country, the tax rates are more or less the same, so I see no argument not to do it the safe way. The common reason is simply contractors can't be bothered with it, expecially dealing with a foreign tax authority, but this is sometimes a fatal
mistake, 3 years working on the wrongside of a tax authority could bankrupt you.

...and one final point whether your earnings as a business are taxable is not the same as personal tax residency, so just staying out of the UK for so many days doesn't mean HMRC won't want your Ltd registered there.

The only problem I see what VAT would you charge your UK Ltd, I think there would be no VAT to pay, but I'm not sure. If you do have to collect German VAT that actually might be a hit. Maybe your UK Ltd can claim it back...hmm tricky.

Do it right.