UK / USA / Ireland / Spain

[oliverson]

Current situation, and one that could likely continue for a sustained period of time (hopefully), is that I contract through my UK Ltd company direct with a US client.

IR35 - client has no physical presence here in the UK and so IR35 reforms don't apply. I get to call the shots on IR35 status and guess what, it's outside! This has been confirmed by QDOS.

Corporation Tax - currently 19% but rising to 25% w.e.f. April 2023.

I can't stop thinking about two things:

1. The IR35 risk is still there and this could be removed completely if I didn't contract through a UK Ltd company.
2. How do I mitigate the Corporation Tax liability

Wouldn't I be better off just setting up an Irish Ltd company to service my US client and paying 12.5% (rising to 15%) there? This would resolve both issues above, but would it introduce any? Or even set up a firm in Spain and take advantage of Beckhams Law?

If it helps (probably complicates) matters I have a property in Spain also. I could live in either the UK or Spain, though I think tax-wise I'd probably be clobbered for more by living in Spain.

Thanks for reading and I searched the forums in advance but couldn't find anything accurately relating to my situation. What would you do in my circumstances? Any other contractors considering incorporating in Ireland to reduce the Corporation Tax?

[jamesbrown]

It isn't the residency of your company that determines whether IR35 is an issue, rather your tax residency and where you are doing the work. As a UK tax resident who is performing work in the UK (I assume, correct me otherwise) and operating through an intermediary, you are still subject to Chapter 10 Part 2 of ITEPA so, yeah, IR35 is still nominally a risk. That said, the actual prospects of HMRC succeeding in such a case are vanishingly small.

If you want to reduce your tax liability, you will need to physically work and pay tax overseas in a more lightly taxed jurisdiction.

Regarding the increase in CT, yes, this will hit, but it is not 25% exactly, rather a sliding scale for profits between £50k and £250k with only profits above £250k subject to the main rate in full. After any salary, pension contributions and legitimate expenses too, obviously.

[northernladuk]

Where will you be living and doing the work?

Isn't Sue B (formally of IPaye) and expert in overseas stuff?

Sue B can you help?

[WTFH]

Out of interest, have you repaid your bounce back loan, etc?

[oliverson]

It isn't the residency of your company that determines whether IR35 is an issue, rather your tax residency and where you are doing the work. As a UK tax resident who is performing work in the UK (I assume, correct me otherwise) and operating through an intermediary, you are still subject to Chapter 10 Part 2 of ITEPA so, yeah, IR35 is still nominally a risk. That said, the actual prospects of HMRC succeeding in such a case are vanishingly small.

If you want to reduce your tax liability, you will need to physically work and pay tax overseas in a more lightly taxed jurisdiction.

Regarding the increase in CT, yes, this will hit, but it is not 25% exactly, rather a sliding scale for profits between £50k and £250k with only profits above £250k subject to the main rate in full. After any salary, pension contributions and legitimate expenses too, obviously.

Your assumptions are correct and thanks for clarifying a couple of issues there.

[oliverson]

Out of interest, have you repaid your bounce back loan, etc?

I'm currently paying it off. I thought long and hard about winding the company up as the future looked so bleak mid-2021 and I discussed the situation with an insolvency practitioner, but at the 11th hour this contract came through. Being outside IR35, 100% remote and a rate equalling my last London gig, I've managed to avoid the c. £ 30k expenses usually associated with London. That is helping me recover very quickly now and so I'm proud I made the decision to fight for my Ltd of 21 years and pay its dues.

[Sue B]

I'm happy to have a chat, see if I can help clarify the situation? Feel free to PM me if you want to set up a call.

[jamesbrown]

I'm currently paying it off. I thought long and hard about winding the company up as the future looked so bleak mid-2021 and I discussed the situation with an insolvency practitioner, but at the 11th hour this contract came through. Being outside IR35, 100% remote and a rate equalling my last London gig, I've managed to avoid the c. £ 30k expenses usually associated with London. That is helping me recover very quickly now and so I'm proud I made the decision to fight for my Ltd of 21 years and pay its dues.

Nice one.