Contracting directly with Belgium Client

[dave_m13]

Hi All

I need some advise really on what other contractors believe should be done. As its still confusing me.

He is some background information, contract started April 2007 in Belgium for 3 months directly with the Client, no agencies involved. It has been renewed every 3 months since. Its now been renewed for a further 9 months from April 2008.

When I first started I looked at various companies that specialise in contractors working in belgium, none really fitted.

So I have spoken to a UK accountant that advised that the contract I was on was inside IR35, due to various reasons and if I were to stay in UK system that they recommend being self-employed. I actually travel back and fourth to UK every weekend.

As I have been working in Belgium over the 183 days that are allowed, I am not sure what sort of position I am now in for Taxes. Most of the UK contractors here where I work are actually going through there own Ltd companies or some sort of umbrella company etc.

Just after some advise from other contractors that have been working in Belgium for some length of time and how they deal with there taxes.

Thanks
Dave

[The Lone Gunman]

Questions like this make my blood boil.
Have you done any research? Do you have any idea what you have got into? Have you any idea how much this will cost you?

There is no point talking to a UK accountant as you are now tax resident in Belgium. The Belgian tax man will want 50% of all your personal income for the tax year that will include the income of your UK Ltd if you have one. On the up side you dont have to worry about IR35 under Belgian tax.

[ASB]

Questions like this make my blood boil.
Have you done any research? Do you have any idea what you have got into? Have you any idea how much this will cost you?

There is no point talking to a UK accountant as you are now tax resident in Belgium. The Belgian tax man will want 50% of all your personal income for the tax year that will include the income of your UK Ltd if you have one. On the up side you dont have to worry about IR35 under Belgian tax.

Picky but:-

The OP is probably tax resident in both Belgium and the UK.

There is no reason why IR35 doesn't apply - in as much as it is a bit grey in the international arena.

If the OP is taking dividends from his UK company then IR35 could still be involved - albeit there is then an issue to be resolved on what has actually been paid where and what status is involved for resolving the income sources under DTA between UK and Belgium. I just wonder how the tax on deemed income is dealt with under the DTA's.

[tim123]

when you say it started in April 2007, was this before or after april 5th?

This makes a big difference to the answer to your problem(s).

And I agree with the Gunman, if his is important to you, you should have asked about all this before deciding whether to take the job

tim

[Turion]

He maybe started on the wrong tracks, but it's way too late to stop now. If you bottle it and try coming clean you'll be done big time. Just keep going with the ltd co now until the contact ends. Keep your head down and stay well out the way of officialdom and you'll be fine.

[oracleslave]

He maybe started on the wrong tracks, but it's way too late to stop now. If you bottle it and try coming clean you'll be done big time. Just keep going with the ltd co now until the contact ends. Keep your head down and stay well out the way of officialdom and you'll be fine.

[Turion]

What's he s'posed to do then! Own up and wave good bye to most of his earnings. Ltd co is still 'de facto' normal for many uk contractors in Belgium. I know cos I've been there and done it, and know others who still are, or use even more dodgy ways of operation (off-shore!). No worries at all and they're better off for it.

[nodric]

Do not panic help is at hand!

Guys,

I've been watching this thread and others for a while and felt I could offer some advice.

I have lived and worked in Belgium for 8 years. The rules are easy to understand and there are many solutions even if you have been working here for months/years without correct registration etc.

LIMOSA, 50%+ tax, 12% Social Security will send you into blind panic but don't allow yourself to be frightened by these and other 'words of wisdom'.

Belgium is one of the best and most 'flexible' places to work and one of the most tax efficient Yes I did say efficient, but, this all depends on getting the right advice and following that advice.

If anyone wants to chat about this without pasting personal and confidential data on the forum then feel free to get in touch.

Nodric

[dave_m13]

Hi All

Just picked this up again.

Well thanks for the advise I do not have a Ltd company, only started contracting when I took this position, mainly due to having over 6 figure salary £

I had looked into this when I started looked at Itecs, connexion and various others but to me most did not sound right. Pay bit in belgium, bit in UK the rest goes to luxembourg but cannot bring money back into UK for financial year. None of these sounded as if they would be a benefit.

I have spoken to UK Account that deals with overseas assignments.

Here is one e-mail I have received with their advise, please let me know what you think?

You have the choice of two options - operating as an employee of your own service company which contracts your services to the client or operating as an independent contractor.

Service Company Employee Option

It appears that X are not insisting that you operate through an intermediary company. Clients often do to avoid risk to themselves under IR35 rules (i.e. being held to be the deemed employer).

If you operate through a UK service company and are liable to UK tax you would have to seriously consider operating IR35. As the 'employer' your service company would have the responsibility for deciding whether or not to apply IR35 - and would bear the consequences if it erroneously failed to do so. And we both agree your terms appear to imply 'employee status' Whilst IR35 employment status might be preferable to paying Belgian tax it is not otherwise a particularly tax efficient option because 95%+ of the company income has to be paid as remuneration/ employment expenses.

There is also a serious risk of becoming Belgian resident if your contract is extended. The only way that I can see that this might be avoided depends upon the status of X. If the Belgian authorities do not consider this to be a permanent establishment or based in Belgium they might not regard a person working only for X as thereby becoming resident.

Travel and accommodation expenses are a further complication. If the engagement is considered a temporary workplace travel costs between UK: Belgium will be allowed. Generally a workplace that is likely to last less than 24 months is considered temporary. However it is possible that HMRC could contend that the service company is a 'one contract' entity making the workplace 'permanent' and so denying relief for travel costs (other than the initial & final journeys).


Self-Employment

As noted X do not appear to prohibit you operating as an independent (self-employed) consultant. Under IR35 provisions they then run the risk of a status enquiry (but as a non-UK organisation are probably not unduly concerned). You would have no personal risk from IR35.

Article 14 of the DTR provides that a UK resident will only be liable to Belgian tax in respect of services provided in Belgium if he has a 'fixed base' in Belgium (which you do not). Your UK resident status is threatened by the operation of the 183 day rule but because your contracts - even if extended - are essentially short term,.you retain a home here, your family are here, and your longer term economic interests are here you are also likely to remain resident and Ordinarily resident in the UK. Potentially you will be dual resident in which event Article 4 operates to determine which takes precedence. Happily I believe that your UK status would prevail because of the factors outlined above.

As a self-employed contractor you would need to register with HMRC and arrange to pay Class 2 NIC. You would base your business at your home address. You should be able to offset your travel and accommodation costs as an expense of your business - providing the contract is not forseeably long enough to cause the Belgian location to become a 'fixed base'.

You referred in one email to travelling to various sites: I am not sure if this applied to the earlier contract only or if it still applies. If it does this would further justify deductibility of travel and associated costs.

I hope that this helps you reach a decision. If you have further queries I will endeavour to answer them. If you wish us to liaise with HMRC on your behalf we would be happy to do so on the basis previously outlined.

[dave_m13]

Hi Nodric

I do not think I can actually PM you, to new to the website I think.

<mod note>Email the admin using the contact form as he can upgrade your account</mod note>

Kind Regards
Dave