Reply to: UK contracting for non UK-citizen

[Nat16]

Umbrellas

You don't have to pay tax in both countries and actually there is a bit of lee way as to which country you pay it in. But as a non UK contractor you can actually get more benefits in terms of expenses. Contact David.Fountaine@commonwealthcontractors if you want toi discuss take homes, tax etc.

[tim123]

Hmm tim123 your numbers remind me: allowances in Denmark actually come out of the highest rate of tax you pay, in the UK they generally come out of the lowest rate.

Even if you save 50% this is still costing you 60 quid. 60 quid is more than most are accustomed to pay for a meal, the purpose of which is just to keep you alive. Might be a bit different if it's a complete evening out, but often it isn't going to be this.

Anyways if you are in the UK for less than 6 months you can work it through a Swedish company.

This is as maybe. It still doesn't necessarily stop you being liable for UK tax on the salary paid for the work. The UK tax rules make a person liable for UK tax on one day's earnings, where the work is 'performed' in the UK. Of course, the revenue aren't going to go around chasing people for one day, but for longer periods they might.

Also remember in the UK in addition to income tax you will also have to pay NI + employers contributions whereas in Sweden this is just in the income tax.

I think this has been covered. EU rules allow guest workers to contine to pay NI in their home country.

tim

[threaded]

Hmm tim123 your numbers remind me: allowances in Denmark actually come out of the highest rate of tax you pay, in the UK they generally come out of the lowest rate.

Anyways if you are in the UK for less than 6 months you can work it through a Swedish company.

Also remember in the UK in addition to income tax you will also have to pay NI + employers contributions whereas in Sweden this is just in the income tax.

[tim123]

Gosh, meals, that another one that brings back memories for me: when I first came to Denmark one of my accountants told me she goes to a certain good restaurant in London each time in the UK, never gets out for less than £120 a person. Guess what: all claimable in Denmark. Only know of that as she was quizzing me why I was bothering with "cheap" places when I was in the UK.

Perhape the reason one doesn't spend 120 quid on a meal is because ultimately, it's still your money. Just because it's tax deductable doesn't stop it taking 80 quid out of your wallet. If you're not the sort of person who would usually spend 80 quid on a meal, would you immediately become that person because of a tax break?

Back to the substantive question. As other's have said, whether you are entitled to pay just foreign tax is not entirely down to you.

If the UK IR tax rules say that you should pay UK tax on income earnt whilst physically in the UK (which, with some exceptions, IS what they say), then that is what you ought to do. It matter's not what the route of the money is. Even a normal lowely employee, doing a stint in the UK, is supposed to declare his salary and pay the requisit tax on it.

Of course, routing it through a company makes it harder for the IR to find out that you are not declaring it.

The UK (now) has an honesty system of tax declaration. The choice is down to you.

tim

[threaded]

Trevligt att träffas. Weeellllll, BMX, actually I would have a talk with your Swedish accountant about your particular circumstances. I live in Denmark and actually for UK contracts I do them through my Danish company because, surprise surprise, allowances in Denmark are real, as opposed to the UK ones being mostly imaginary, non existant and not knowing where you actually stand for like 6 years after due to the Gay Brownstuffs habit of retrospectively changing stuff.

For instance if you have kids from previous relationships and putting them through private schools then almost certainly pay Danish tax as you can claim the school fees. You absolutely cannot do that in the UK.

Another lot: mileage for driving to clients, subsistance allowances when having to stay in digs local, hire cars, petrol, plane flights, meals. All claimable in Denmark, many not even requiring a VAT receipt, just indicate on the card statement. Reminds me: in Denmark, you can claim the hire car, petrol and a mileage allowance.

Gosh, meals, that another one that brings back memories for me: when I first came to Denmark one of my accountants told me she goes to a certain good restaurant in London each time in the UK, never gets out for less than £120 a person. Guess what: all claimable in Denmark. Only know of that as she was quizzing me why I was bothering with "cheap" places when I was in the UK.

[tim123]

. This will be fun when I retire and needs to claim pension from 2 countries.... Under normal circumstances you pay SS where you reside.

This is exactly why you don't want to pay the UK NI. There is a minimum qualifying period for a pension (all countries have one) and the UK's is 10 years.

You should be able to pay just Swedish NI.

tim

[ASB]

"You´ve highlighted a common misunderstanding. When people go and just work in a country and live in hotels they think they´re not resident and don´t pay tax."

Blaster,

It depends upon the circumstances. I have a better idea of what mine are than you [smile]

I personally have not spent enough time in Portugal to become tax resident there - but as you say it is a possibility. Equally my company is not regarded as resident in Portugal - the two reasons for this are because it does not have a place of business there (in which case I would have become instantly resident under Portugues law) and because I am not Portuguese resident for tax purposes (in which case the authorities would consider myco had a branch there and would seek to tax on Portugues generated revenue - or worldwide after a while). The Portuguese authorities accept this in my case.

In April 2004 Portugal changed its rules (largely to prevent it's perceived leakage of tax from non residents owning property through tax haven registered companies). The basic rule then became that any Portuguese company had to deduct 15% from the bills for services provided by non resident companies. This was paid to the Portuguese authorites.

This is where, as you rightly surmise it all gets a bit of a mess. A non resident company is entitled not to have the deduction - provided it can provide a certificate from the competent authorities [HMRC for me] stating that it is resident in a country with which there is tax treaty [Portugal-UK] and also that said company is liable to taxation on all it's worldwide income.

Until you have produced this - and it has to be done annually with estimates of intended transactions between the two parties - the 15% is deducted. This is not reclaimable from the Portuguese authorities if the relevant certificate was not provided to the client at the time of payment.

However under the terms of the DTA because Portugal were not actually entitled to deduct the tax it is not offsettable against the UK CT - which it would have been were they actually entitled to it.

It is dangerous to generalise, since everybodys rules are different. And of course more than one lot can apply at given point. (e.g. if I were tax resident in Portugal at any point that would have made no difference whatsoever to my UK residency - I would still have been resident, domiciled and ordinarily resident in the UK).

A reasonable generalisation is that wherever you are physically located the authorities will have an interest and may well seek to tax.

[BlasterBates]

Although I do quite a lot of work in portugal neither I nor my company have been resident in Portugal.

You´ve highlighted a common misunderstanding. When people go and just work in a country and live in hotels they think they´re not resident and don´t pay tax.

Almost invariably after 6 months you should, and I don´t know anywhere you don´t, and it doesn´t matter whether your company is registered or not. That´s because the EU allows foreign companies to operate, but doesn´t exempt them from tax. A lot of contractors get into hot water in this, and then because they tried to get the tax paid in the UK end up paying it twice, and then it gets really complicated because the tax authorities don´t understand it when you tell them that you will pay tax in the other country after all.

As to BMZ, my advice is pay UK tax, it makes life easier you save money and you don´t get on the wrong side of the UK tax authorities idf you stay longer than 6 months. Yes you´ll have to declare your earnings in Sweden, but no they won´t tax you if you don´t have any other Swedish earnings. In other words they only use the declaration to work out the marginal tax rate on Swedish earnings, which presumably you won´t have.You need to check that, but that is how it works everywhere else with very few exceptions.

[BMX]

This is really a mess... Nice that we have the EU and pay the 100000 officials good money and the only thing that comes out of it is that we no longer get to buy taxfree liquer when flying...

Anyway after some more calls I have been told that because I have a swedish Ltd and plan to get employed in an other EU country I fall under an exception rule regarding the social securities. This rule means that I can be part of both sweden and UK social security systems and therefore can pay SS in UK when working in UK and SS i sweden when working in sweden. This will be fun when I retire and needs to claim pension from 2 countries.... Under normal circumstances you pay SS where you reside.

Maybe I just stay in sweden and call in sick....

[Joe Black]

I agree with ASB and boredsenseless.

If you're travelling back and forth then you will most certainly come under the jurisdiction of the Swedish tax authorities, unless of course you're away for more than 6 months and return home only occassionally. Of course given the UK's wonderful system of keeping no record of when anyone comes into or leaves the country whether you're considered to have returned home at all would depend on the Swedish side of things.

As ASB said you need decent advice. Your last post though suggests a little confusion in what you're being told and I would recommend a second opinion from someone who has experience with contractors working in various countries, not just your average local tax advisor.

If you can show you're in the UK the required period then all the UK options become open to you and its much simpler. If you can't then you either invoice from Sweden, go through some 'offshore' type thingy (hmm!), or you go through a UK Ltd/umbrella, the latter options of course complicate things one way or another.

"There is no real reason why a company should be reluctant to accept invoices from a Swedish company."

Indeed.

[ASB]

In theory any EU citizen can elect to pay social security in their country of residence. You should be able to find some information about this on the HMRC website. You *should* be able to pay no UK SS and continue paying swedish. Or vice versa. Here is somewhere to start looking (see part 3). http://www.hmrc.gov.uk/pdfs/ir20.htm

There is no real reason why a company should be reluctant to accept invoices from a Swedish company. But if there is an agency involved they often simply won't. In the case where the company happens to be resident in a tax haven it can be very difficult, the IR do try and keep an eye on this sort of arrangement.

There is nothing to stop you:-

Incorporate a UK company.
Bill client through that.

That company then pays you a salary in the UK (or not as the case may be).

It could be that the company is in fact a wholly owned subsiduary of a swedish company.

Of course whatever you do in this sort of arrangement could complicate your affairs in Sweden.

It is not entirely unusual for someone in this sort of position to incorporate via nominees and do a runner with the cash whilst waiting for the company to get struck off. This is a very tax efficient way of dealing with things but leads to jail time when they catch up with you.

[BMX]

lawyer advice

Hi,

I've now talked with the swedish tax athoroties and my tax-lawyer and the rules are very complicated. As far as I can understand:

1. If I move to UK for a period of more than 6 months and not are going back to sweden for more than an ore two occasionally holidays during this period. Then I will pay all my taxes in UK.

2. If I commute between Uk and sweden (this is what I will do) then I pay taxes in UK and then taxes in sweden but can claim deduction of the already paid tax in UK when I pay the swedish tax.

Simple? No. Because this rules only cover the income tax and not the social security taxes. So in addition I have to convince my UK umbrella company to register at the swedish tax-people and then let them now how much social security tax they pay for me in the uk.

I dont think this will work.

What I really want to do is tho just invoice the UK-client for the consultant service and then pay myself salary in my own company in sweden. This is not acceptble for the client because they fear that then they have to pay my taxes later. Is this correct?

[ASB]

BMX,

You need some specialist advice.

It is perfectly possible to be resident - for taxation purposes - in both the UK and Sweden.

Your UK tax position is likely to be that you will be UK resident, not ordinarily resident and not UK domcilied. The effect of this is HMRC will only seek to tax you on your UK generated income. However this may give you some tax planning opportunities by carefuly structure of your affairs.

Your Swedish tax position will be as governed by Swedens fiscal code. I think Sweden operates a mondiale tax system. Also I doubt that your sojurn to the UK will get you out of their clutches. [It wouldn't necessarily get you our of the UK HMRC clutches for example].

The result of this is that Sweden is likely to want to tax you on your UK based income as well.

This is where the DTA comes in. Generally the higer charging authority will credit what the lower charging authroity has claimed against the bill. But it does depend totally on the terms of the treaty. It really is a difficult area and things can easily go wrong.

As an example myco is in disputhe with HMRC and the Portuguese fiscal authorities. Although I do quite a lot of work in portugal neither I nor my company have been resident in Portugal. Recently they changed their rules so that 15% of all bills for service from non resident co's are wthheld as a withholding tax. Normally I would expect to offset this against UK corporation tax. Currently the IR office are refusing to allow this, because it doesn't exactly meet the DTA which was not changed when Portugal changed the rules]

As I said, you need specialist advice that is specific to your situation.

[boredsenseless]

Are you planning to live in the UK for the duration of the contract? If you are commuting back to sweden each weekend (or even once a month) you'll probably be deemed to be a Swedish taxpayer working in the UK and hence paying Swedish taxes.

I'd ask a tax adviser for help on this one as I am sure most of us will only be able to give you informed guesses based on similar situations

[mcquiggd]

Apparently the only legal requirement is that you bring with you your passport, and at least two attractive, single, Swedish ladies of child-bearing age, who have a friendly disposition.