diy offshoring

[turnipforgeindustries]

hello everyone,

I have a question that i would be very grateful if anyone could point me in the right direction.

I have residency in madeira, PT, an EU tax haven where companies are taxed 1%.

Is it legal/ possible to operate solely in the UK as an IT contractor, working as the only employee for my company based in portugal, and ask the employer to pay a GBP bank account in portugal?

as i understand it, the EU you can only be taxed once for any income, so if i am paid in another country I should just pay tax in that country.

I suppose the taxman has thought of this and if you a one man company and operate in UK then you have to declare and pay tax there. is that correct?

many thanks in advance.

Paul

[Wanderer]

Is it legal/ possible to operate solely in the UK as an IT contractor, working as the only employee for my company based in portugal, and ask the employer to pay a GBP bank account in portugal?

I suppose the taxman has thought of this and if you a one man company and operate in UK then you have to declare and pay tax there. is that correct?

Welcome

Yes, the tax man has thought of it. I'm not a UK national either and I looked into the possibilities a while back. The problems you have to overcome are:

1. If you are based in the UK (ie resident here for > 183 days per year) then it is most likely that you will become resident for tax purposes and have to pay tax on your worldwide income unless you can get "non domiciled" status.

2. Generally speaking, UK agencies will not deal directly with an offshore company.

Non domiciled may be possible if you were born outside the UK but they have tightened the rules on this and it's now only really suitable for the big earners (millions) who give big donations to the main political parties and big corporations.

Even if you did get non-dom status, you would have to pay tax on income actually generated in the UK which would be the bulk of your money if you were a 9-5 contractor working in an office in the UK.

If you do a lot of business in other countries or you are selling something (say software or intellectual property that you developed) rather than consultancy then you might be able to do it. Likewise if you can live in Portugal and do the work from there, staying non-UK resident (< 183 days) you might be OK but see item 2. above.

It's going to be a hard sell and you would need professional advice about your own very specific circumstances. The short answer is probably "Nice try, but no".

[turnipforgeindustries]

hi wanderer, thanks for your reply,

looks like spiralling complexity and accountant costs so i'll probably leave it. like you said...nice try.

i think i will get the sack if i ever started contracting in the UK as my motivation will be reduced to zero after 18th of every month when i know i am working just for the taxman and when barcap pay 1% tax!!

if i find a magic cheeky monkey solution i'll be sure to let everyone know

[ASB]

2. Generally speaking, UK agencies will not deal directly with an offshore company.

This is easily dealt with. Set up MyCo UK. Enter into back to back contracts so the chain becomes Agent, MyCo UK, MyCo Madeira.

But this doesn't make all the problems go away by any means. You covered some of them, but a few others spring to mind

- Is the OP themselves resident in the UK. Remember it is entirely possible to be resident in more than one place at once.
- Is MyCo Madeira at risk of becoming UK resident due to it's centre of economic interest and where it is controlled from.
- Is the common ownership of MyCo UK and MyCo maderia such as one will be treated as a branch.
- If the OP did not own MyCo UK would they still be regarded as controlling it
- What is the impact of the DTA between the UK and Portugal (as far as it covers Madeira which has special status) on both corporate income and personal income
- Would the 20% Portuguese withholding tax still apply on the services nominally exported via any UK entity involved

Ultimately if the OP is genuinely resident in Madeira and avoids becoming resident in the UK then they may be able to save a few quid, but it will depend very much on the individual circumstances - as it always does.

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