Reply to: Offshore contractor working for UK Client

[JamesBrown11]

Instead of fighting offshoring, you are openly helping yet another Indian steal our clients and not pay any UK tax.

[raj273]

Try google searing international tax accountants UK.

I know all this because I have done this research just recently (in fact the last 2 days) because I am having to move to India too shortly (after being nearly 15 years in the UK) for personal reasons. But there is a tiny (but VERY SIGNIFICANT) difference in mine and your situation - my client is Europe based so if I setup an offshore company AND am a non-UK tax resident then I have nothing to do with UK taxes (hence IR35) either personally or from company (corp tax).

However, I will need those these funds back in the UK which I "think" I can do via a UK holding company etc. or even personally under DTA but need specialist advice.

In your case, if your client does not agree to an offshore company AND your contract is NOT outside IR35 then nothing much you can do.

Good Luck!

Yes, I agree that this would need a specialist advice but I appreciate all suggestions, many thanks!

[MrJoeBloggs]

It's not all about evading UK taxes. I think I have a genuine case where I am not working in UK for most of the time, so I think its only fair to expect not to pay high taxes for all the amount I earn whilst working remotely.And although I have every reason to believe this role would be outside IR35, the blanket bans are not helping.

Try google searing international tax accountants UK.

I know all this because I have done this research just recently (in fact the last 2 days) because I am having to move to India too shortly (after being nearly 15 years in the UK) for personal reasons. But there is a tiny (but VERY SIGNIFICANT) difference in mine and your situation - my client is Europe based so if I setup an offshore company AND am a non-UK tax resident then I have nothing to do with UK taxes (hence IR35) either personally or from company (corp tax).

However, I will need those these funds back in the UK which I "think" I can do via a UK holding company etc. or even personally under DTA but need specialist advice.

In your case, if your client does not agree to an offshore company AND your contract is NOT outside IR35 then nothing much you can do.

Good Luck!

[MrJoeBloggs]

Not exactly, but it is to avoid any unfair taxes for income that I'm otherwise earning whilst working remotely abroad. Can the taxes not be split? Do I just pay UK taxes for the income I earned while working here in UK and pay taxes abroad for the income earned there?

Absolutely. This is exactly how it works but you you need to ensure you are non-UK resident using SRT.

[raj273]

There is again confusion between being non-resident in the UK for tax purposes and IR35. These two are NOT related!

I think what he is trying to do is escape IR35 by working through an offshore company. If his client is declaring the other contractors INSIDE IR35, he will be also INSIDE, no matter if he works through a company registered here or in Mumbay...

It's not all about evading UK taxes. I think I have a genuine case where I am not working in UK for most of the time, so I think its only fair to expect not to pay high taxes for all the amount I earn whilst working remotely.And although I have every reason to believe this role would be outside IR35, the blanket bans are not helping.

[raj273]

Raj,

The ideal most solution for you is to establish an offshore company and bill your client via that IF your client can agree with you. This is assuming:-

i. You do not need money back in the UK for any reasons from your offshore company - still possible AND legal you are a non-UK tax resident but more sophisticated if you can afford expensive international tax advisers :-)

ii. You are definitely a non-UK resident as per the HMRC SRT. You state "I may have to work from a UK location for few months" and "may not be more than 60 days per year". These statements suggest you have not done a proper SRT assessment on your. Generally speaking, if you are working here longer than 31 days in a year then you could be a UK tax resident. Seek professional advice.

If you can only contract via a UK LTD company then it is a bit messier and you truly need (expensive) international tax professional advice. It may just be easier (and cheaper) for you to ensure your contract is outside IR35. The fact that you work mostly offshore rings positive bells.

If you are non-UK tax resident then generally "you" (personally) pay tax on UK income only and not on any overseas income. Therefore, you may be able to pay a good salary directly to yourself overseas without having to pay any income tax on it in the UK (subject to double treaty etc.). You still have to pay or "should" pay and declare it in your resident country.

This is commonly done by top-notch people of big companies to avoid personal tax i.e. become tax-resident of a tax efficient country and get them paid directly there and basically keep moving themselves and their employment around. Having said that, they have super-expensive tax advisors behind them.

Therefore, it is all possible and perfectly legal BUT you 500% need international tax advisors if you want to go down this route. Or just simply ensure your contract is outside IR35, pay taxes here and live happily wherever you are.

Side notes:-

i. Nothing to do with your passport/citizenship.
ii. if you are uk tax non-resident then you need to declare it in your SA which you can not do on the HMRC's online format which is most bog-standard IT accountants do. You need to file paper statements and ideally by the accountants who know how to file non-uk tax resident's accounts and may save you money too.
iii. If you have no UK income (personal) then you "should" not need to file SA if you tell HRMC before you leave, there is a form.

Hope this is useful.

Thanks so much for the detailed advice!! I hope to seek a professional advice, but I am facing few issues finding the right ones as they seem to be unclear about these taxation rules of working from India for a UK based client.

[raj273]

What's the motivation to use this convoluted set up, to avoid UK taxes?

Not exactly, but it is to avoid any unfair taxes for income that I'm otherwise earning whilst working remotely abroad. Can the taxes not be split? Do I just pay UK taxes for the income I earned while working here in UK and pay taxes abroad for the income earned there?

[skysies]

Raj,

The ideal most solution for you is to establish an offshore company and bill your client via that IF your client can agree with you.

Hope this is useful.

There is again confusion between being non-resident in the UK for tax purposes and IR35. These two are NOT related!

I think what he is trying to do is escape IR35 by working through an offshore company. If his client is declaring the other contractors INSIDE IR35, he will be also INSIDE, no matter if he works through a company registered here or in Mumbay...

[MrJoeBloggs]

Raj,

The ideal most solution for you is to establish an offshore company and bill your client via that IF your client can agree with you. This is assuming:-

i. You do not need money back in the UK for any reasons from your offshore company - still possible AND legal you are a non-UK tax resident but more sophisticated if you can afford expensive international tax advisers :-)

ii. You are definitely a non-UK resident as per the HMRC SRT. You state "I may have to work from a UK location for few months" and "may not be more than 60 days per year". These statements suggest you have not done a proper SRT assessment on your. Generally speaking, if you are working here longer than 31 days in a year then you could be a UK tax resident. Seek professional advice.

If you can only contract via a UK LTD company then it is a bit messier and you truly need (expensive) international tax professional advice. It may just be easier (and cheaper) for you to ensure your contract is outside IR35. The fact that you work mostly offshore rings positive bells.

If you are non-UK tax resident then generally "you" (personally) pay tax on UK income only and not on any overseas income. Therefore, you may be able to pay a good salary directly to yourself overseas without having to pay any income tax on it in the UK (subject to double treaty etc.). You still have to pay or "should" pay and declare it in your resident country.

This is commonly done by top-notch people of big companies to avoid personal tax i.e. become tax-resident of a tax efficient country and get them paid directly there and basically keep moving themselves and their employment around. Having said that, they have super-expensive tax advisors behind them.

Therefore, it is all possible and perfectly legal BUT you 500% need international tax advisors if you want to go down this route. Or just simply ensure your contract is outside IR35, pay taxes here and live happily wherever you are.

Side notes:-

i. Nothing to do with your passport/citizenship.
ii. if you are uk tax non-resident then you need to declare it in your SA which you can not do on the HMRC's online format which is most bog-standard IT accountants do. You need to file paper statements and ideally by the accountants who know how to file non-uk tax resident's accounts and may save you money too.
iii. If you have no UK income (personal) then you "should" not need to file SA if you tell HRMC before you leave, there is a form.

Hope this is useful.

[skysies]

But what if I meet the automatic overseas tests set out by HMRC especially '2.3 Third automatic overseas test' here - RDR3: Statutory Residence Test (SRT) notes - GOV.UK

You can NOT escape IR35 even if you meet those tests. If you work for a UK company, and spend time working in their UK offices, you need to pay tax in the UK. There's no way around it.

The only way in your case to evade IR35 is if you work offshore 100%. Doing this from an EU country will become very difficult with Brexit. If you are thinking about a non-EU country (India?), forget about it.

[BR14]

What's the motivation to use this convoluted set up, to avoid UK taxes?

'course not.
no tax dodgers on This forum.

[BolshieBastard]

I've an offshore pvt ltd company through which I would like to get into a contract with a UK based client. I'm currently a UK resident (not a UK citizen) but would be moving back to offshore location in few months from now. My contract would most likely be starting in next couple of months and I may have to work from a UK location for few months but as said I would be working from an offshore location for most of the contract period/financial year. With all IR35 reforms I'm slightly confused if I would be falling under IR35 rules OR would I be out of UK taxation rules. Would appreciate any advice, thanks!

What's the motivation to use this convoluted set up, to avoid UK taxes?

[raj273]

The moment you set your foot in, you would be impacted by IR35. The rules I mentioned are about non-residency for tax purposes. You can be a non-resident and still inside IR35. That seems to be your case, as you'll be working certain days in the UK.

In fact, that could be a better alternative for you, i.e. paying the taxes in the UK and working with a UK-based LTD.

If you go for the 100% offshore model, remember that you will become an exporter of services to the UK. If you happen to be in the EU, you'll find in a couple of months that everything will change when they put on the tariffs. I also don't think any company in the UK will deal with you in that scenario.

But what if I meet the automatic overseas tests set out by HMRC especially '2.3 Third automatic overseas test' here - RDR3: Statutory Residence Test (SRT) notes - GOV.UK

[skysies]

Well, I am not really looking to come back to settle in UK in next couple of years. Although I might become a UK citizen soon and might have to visit UK few times for business meets, but the count may not be more than 60 days per year. Is that not reasonable?

The moment you set your foot in, you would be impacted by IR35. The rules I mentioned are about non-residency for tax purposes. You can be a non-resident and still inside IR35. That seems to be your case, as you'll be working certain days in the UK.

In fact, that could be a better alternative for you, i.e. paying the taxes in the UK and working with a UK-based LTD.

If you go for the 100% offshore model, remember that you will become an exporter of services to the UK. If you happen to be in the EU, you'll find in a couple of months that everything will change when they put on the tariffs. I also don't think any company in the UK will deal with you in that scenario.

[raj273]

Well, I am not really looking to come back to settle in UK in next couple of years. Although I might become a UK citizen soon and might have to visit UK few times for business meets, but the count may not be more than 60 days per year. Is that not reasonable?