Reply to: Resident in Guernsey for tax purposes wanting to do contracting in UK

[secwombat]

If you are using a Guernsey Ltd Co, and are personally tax resident in Guernsey, than IR35 tax rules don't apply when interacting with a UK company, as it's strictly a B2B relationship - i.e. UK tax cannot be applied to an offshore entity (and IR35 is a personal tax issue - not company). Maintaining that tax residency, whilst keeping a client happy is another matter.

Using a Guernsey umbrella won't alter that relationship (there are some over here - but primarily for things like seafarers, which seemingly is a big tax wease here - I'd suggest avoid). I agree about the dividend distribution item being irrelevant for a Guernsey company - it's treated as personal income so fully taxed for Income & Social Insurance.

Given the current tax discussions going on in Guernsey, I suspect that any advantage we might have over just going through a UK umbrella and taking the hit, are rapidly diminishing (something which the politicians don't / won't understand)

[Lance]

<snip>
I am interested in the assertion that IR35 "isn't relevant".

IR35 determination is now with the end client and being Guernsey resident doesn't seem to stop you being caught up in it.<snip>

there's a difference between the legal relevance of IR35 in so far as UK law would consider it, and a client's risk attitude where it's easier to just put everyone as inside.
That's why you get caught up in it. Client choice.

[PeteTsPM]

Morning all, interesting thread and thanks to panders for the question and secwombat for the local knowledge. As someone based in Guernsey and contracting into the UK for a number of years I am interested in the assertion that IR35 "isn't relevant".

IR35 determination is now with the end client and being Guernsey resident doesn't seem to stop you being caught up in it. I totally agree the best route would be to get a NT tax code etc but that doesn't seem possible even with a UK NI (which I have from my youth).

The only way to avoid the IR35 issue is to remove the PSC connection and I wondered if it was worth creating a Guernsey based umbrella that could remain tax resident in Guernsey whilst avoiding IR35. Yes we'd loose the dividend distribution but under self employed laws in Guernsey that isn't really worth diddly and at least we could work into the UK and remain Guernsey tax resident outside of IR35.

[panders]

Thanks for this, I’ll ask the Accountants about this option as I do have a UK NI number. I’ll let you know.

[secwombat]

Whilst I was between contracts during Covid and had time on the bench to contemplate, there was another potential route I was investigating, but hadn't come to a conclusion.

Basically it was the route of attempting to get an NT tax code from HMRC on the basis that I was tax resident in Guernsey. You'd also need to get a social insurance certificate of coverage from the revenue people in Guernsey (as there is a bilateral agreement), and then get that cleared by HMRC.

In theory it would then mean UK tax registered - but no tax applied in the UK, and you'd have to pay it locally. This was all theory - and I fell at the first hurdle, as you need a UK NI number to proceed, and at the time couldn't get one as wasn't able to travel.

Whether this would be acceptable to HMRC or an Umbrella I never really found out, and in the meantime started a contract with a more friendly UK agency who coped with my Ltd.

Edit:

Just re-read your last post. If you're staying with family, you're likely to hit the UK residency tests, so will be paying UK tax. You won't however be double taxed as there are taxation agreements between the UK & Guernsey, and you can offset one against the other. The social insurance element might be worth investigating though, if you're looking to stay in Guernsey long term

[panders]

Thanks so much, particularly to secwombat.
I wasnt specifically planning to use a Ltd Company, I was expecting to use an umbrella and stay with family while I work. Remote working in my field is uncommon as I am in the social care sector!
I'm not trying to dodge tax, I just want to try and avoid double tax!! I am waiting a call back from an advisor who I hope will be able to help!
I do know that despite the treaty, I have to declare all global income on my Gsy tax return, my taxes are currently simple as I am employed and am taxed at source.

[secwombat]

If you're personally both Guernsey domiciled & tax resident, a Guernsey company remains resident in Guernsey. On the assumption the OP stays within both of those residency rules, then travelling to the UK and working on a business trip basis, all should be fine ...

If the tax residency moves to the UK by passing the UK statutory residency rules, the Guernsey entity becomes UK tax resident (and subject to UK company tax), but still domiciled in Guernsey. This is all assuming sole directorship - if multiple directors with different residencies, then that's a different matter.

Confused yet ?

The relationship of Guernsey companies to the UK is subject to rules from prior to the EU (of which we were never part).

Perhaps I should of course do the frequent poster statement - if in doubt, ask your accountant. However - UK accountants won't touch Guernsey companies, and you need someone with local experience, and even then the standard accountants won't rule on tax issues, and there are a very limited number of tax advisors willing to cover this off. Fortunately they know their stuff, and they will have regular links to HMRC (£££ of course)

[Fred Bloggs]

Maybe there's something unusual about a Guernsey incorporated company with the director working in the UK? But ordinarily I would expect that the Guernsey registered company would become a de facto UK registered company by virtue of the director in control of the company being in the UK? UK corporation tax would therefore be due on UK profits? Apologies if I misunderstood.

Obviously, 100% remote working from Guernsey for a UK client is a different matter entirely.

[secwombat]

My comments above are also based on using a Guernsey Ltd company - where if you keep your personal tax residency to the island, then the company will be tax resident in the island.

There is a double taxation & and a rare social insurance agreement with the UK, meaning that if you can keep your tax residency in Guernsey, you can avoid UK income based taxes (and you can decide which national pension you want - although of course if you opt for the UK, you're treading on dangerous ground)

There are some "buts" of course:

- You can't reclaim any VAT (although supposedly a Guernsey entity can register for VAT, HMRC flatly refused my application), although this is countered by legitimate expenses being tax free.
- Any invoices don't include VAT, and the invoiced company will need to account for the VAT using the HMRC B2B & B2C general rules services. Some companies don't like doing this basic accounting.
- Guernsey company rules & admin is a fair bit more expensive than the UK as there are quite strict regulations (more so than the UK, as the tax authorities Eye of Sauron is always pointed towards the islands)

Edit:
Just to note that it's certainly not tax "free" in Guernsey - as a local you'll be paying 31.3% effective taxes with lower allowances than the UK, and those allowances are quite rapidly removed at higher levels of income. Add in the cost of living over here, it's not all sunshine & tomatoes - but it is a beautiful island - in summer ...!

[BlasterBates]

Thanks all, my reading suggests that there are tests to determine tax residency etc and also a 91 day cut off or you can get double taxed?

@ Fred you say "There are hundreds of threads here asking the same question." I did a forum search using the word Guernsey before I posted and found nothing relevant. I am aware that different jurisdictions have different tax treaties so did n't think posts about other jurisdictions would necessarily apply. If you can direct me to some I'd be grateful.

Your comment "you will soon get the hang of it" suggests that you're a bit irritated by my posting this question? Whats a forum for if not to ask questions?

Tax residency isn't relevant as to whether the income is taxed in the UK or not. If you work in the UK then the income is taxable in the UK regardless of how many days you spend in the UK. It is unlikely that your income will be taxed twice as there a double taxation treaty. If you have proof that you payed tax in the UK you almost certainly won't pay any additional tax.

Don't make the mistake of assuming you can work for 91 days without being taxed.

[eek]

Terrific post by secwombat too. Having in recent times been tax resident in as many as three countries simultaneously myself, that's great advice.

+1 can't trump local knowledge and the OP is very lucky that a real local turned up to help - the airbnb / holiday rental issue is something I never would have picked up on.

[Fred Bloggs]

Terrific post by secwombat too. Having in recent times been tax resident in as many as three countries simultaneously myself, that's great advice.

[secwombat]

Not sure you qualify as a proper Guernsey "donkey" after a couple of years, but as someone who is, and has been contracting for several years, I'll chip in here (although it's largely covered in the other posts):

Two main issues + one bonus:

- Not many UK agencies will want to know - so it largely comes down to going direct or the agency being told to handle you off the back of a recommendation (don't mention you're in Guernsey until the IR35 discussion crops up)
- UK Statutory Residence Test rules - you need to know these back to front.

- If you were based in the UK previously, 2 years isn't enough for HMRC to have let go of their claws, so you will have reduced qualifying travel days (midnights really).
- Make sure you know how many ties you have with the UK (cars / houses / dependents etc) - each one will also reduce your travel days. Aim for 3 ties, which will give you your 90 days - 2 ties is the best (which are work related), but this is likely to be a challenge for someone not fully local.
- You'll get used to hotels - rentals / AirBnB etc count as a tie, so pick a hotel chain where you want the points !
- Holidays / transit etc can all potentially count towards your travel days
- Weather related delays count (for those who don't know, Guernsey is one of the few places in the world where you can have a gale blowing, and still be fog bound ...)
- Don't break the rules - the local tax people as well as the UK keep an eye on all regular travellers.

If you can sort the above, the bonus is that IR35 isn't relevant if you can maintain your local tax residency.

Prior to Covid, keeping within the rules was quite a challenge, and quite often I had to limit holidays and so on, as couldn't risk going over the limits. With Covid, that's gone away as WFH is pretty much the norm.

You will be paying income tax + self employed social insurance (UK NI equivalent) on anything you take out of the company (as the UK should really for one person band companies imho), although no corporation tax at the moment. Keep an ear out for the tax changes incoming, I expect we'll be hit hard with the suggestions being bandied about.

Hope this helps.

[Fred Bloggs]

You searched based on a specific island.

Fred already answered you - you pay tax on income where you work.

If you want to get into the complexities of how that would apply to you, specifically, being a resident of Guernsey, with your very specific set of circumstances that we don't currently know, then you'd need to speak to a tax advisor.

I suspect agents will give you a wide berth if you are going to create more problems for them than profit.

Thank you. More eloquent than I can muster.

[WTFH]

Thanks all, my reading suggests that there are tests to determine tax residency etc and also a 91 day cut off or you can get double taxed?

@ Fred you say "There are hundreds of threads here asking the same question." I did a forum search using the word Guernsey before I posted and found nothing relevant. I am aware that different jurisdictions have different tax treaties so did n't think posts about other jurisdictions would necessarily apply. If you can direct me to some I'd be grateful.

Your comment "you will soon get the hang of it" suggests that you're a bit irritated by my posting this question? Whats a forum for if not to ask questions?

You searched based on a specific island.

Fred already answered you - you pay tax on income where you work.

If you want to get into the complexities of how that would apply to you, specifically, being a resident of Guernsey, with your very specific set of circumstances that we don't currently know, then you'd need to speak to a tax advisor.

I suspect agents will give you a wide berth if you are going to create more problems for them than profit.