Reply to: Isle of Man Resident contracting in UK

[ShandyDrinker]

Similar question hwre, sp if i have a contract with a company in the UK and I move to the isle of man (its 90% remote work) can i register my ltd company in IOM and just pay IOM.tax only?

Interesting that a 15 year old thread is resurrected.

The answer is that many UK companies just wouldn't deal with Manx registered companies. Now sure, if you're an established B2B company that regularly does business in the UK you might be in with a shot. But the reality is for a new micro-entity, it just isn't going to happen. The only thing that could perhaps get around it is to have a UK entity which is owned by a Manx entity.

Per Claude (AI):

Yes, using a UK company wholly owned by a Manx parent company could potentially get around some of the reluctance, but it comes with important caveats and risks:

How it could help:

1. Appears as UK entity: A UK subsidiary is a separate legal entity governed under UK law, which provides credibility and commercial respectability UK: How can an overseas company establish a business presence in the UK? Is a UK "branch" the same as a UK subsidiary company?. From the client's perspective, they're contracting with a UK registered company.
2. Meets basic requirements: Many companies require contractors to use UK registered limited companies and provide UK VAT certificates Payment to an off shore Company | AccountingWEB - a UK subsidiary would satisfy these requirements.
3. Separate legal identity: A subsidiary is a separate legal entity to the overseas parent, which helps ring-fence liabilities.

However, there are significant risks and limitations:

IR35 still applies: Contractors trading via a UK-based limited company will find IR35 applies wherever in the world they are working Shout99 : Expert analysis: Isle of Man IR35 avoidance strategy flawed. The IR35 assessment would still be based on the working relationship, not the corporate structure.

HMRC scrutiny: HMRC has successfully challenged arrangements where UK subsidiaries were used to funnel payments to Isle of Man parents without proper tax deductions Supreme Court confirms UK parent company liability for acts or omissions of a foreign subsidiary: considerations for due diligence, restructurings and compliance. In one case, the tribunal found that a UK company making payments to its Isle of Man parent was required to make CIS deductions.

Additional compliance burden: UK subsidiaries come with various reporting requirements, annual accounts, corporation tax returns, and potential auditing requirements.

Substance requirements: The UK company would need genuine commercial substance and purpose beyond just being an intermediary. HMRC looks at the reality of arrangements, not just their legal form.

Potential for challenge: If the structure appears to be primarily for tax avoidance rather than genuine commercial reasons, it could be challenged as an artificial arrangement.

Bottom line: While a UK subsidiary structure might initially satisfy client requirements and get around the immediate reluctance to work with Isle of Man companies, it doesn't eliminate the underlying tax compliance issues that concern UK businesses. The IR35 rules would still apply, and HMRC has shown willingness to look through such structures where they appear to be primarily tax-motivated rather than commercially driven.

A contractor considering this approach would need specialist tax advice to ensure the structure has genuine commercial substance and complies with all relevant UK tax obligations.

[JeremyCK]

Similar question hwre, sp if i have a contract with a company in the UK and I move to the isle of man (its 90% remote work) can i register my ltd company in IOM and just pay IOM.tax only?

[cssmonauts]

Great thread thus far, looks like this matches my situation.

I am living in Spain (since 2004) and am tax resident here. I have a contract offer in the UK and was hoping on using my Spanish LTD company but the agency seems nervous about this.

So, to the question. If I set up a UK LTD company and spend 5 days a week in the UK fulfilling the contract (meaning more than 183 days a year) can I expense flights and lodging as I am travelling from my home to fulfil the contract? I really do not mind paying the UK tax, I just want the contract!

Cheers, iarmst

Exactly. Agents don't like offshore companies because it could leave them liable for unpaid tax & NI.

Thanks to the guys & gals on here, I'm pretty much concluded that a UK LTD is the easiest, most efficient & safest route to go. Good luck dude!

[iarmst]

Same situation, coming from Spain

Great thread thus far, looks like this matches my situation.

I am living in Spain (since 2004) and am tax resident here. I have a contract offer in the UK and was hoping on using my Spanish LTD company but the agency seems nervous about this.

So, to the question. If I set up a UK LTD company and spend 5 days a week in the UK fulfilling the contract (meaning more than 183 days a year) can I expense flights and lodging as I am travelling from my home to fulfil the contract? I really do not mind paying the UK tax, I just want the contract!

Cheers, iarmst

[Boo]

I will be travelling & staying in the UK during the week, home at weekends. I've seen some things that say that if I work more the 180 days I might have to pay UK tax, so not sure.

It is 183 days </pedantic>. There are some informal statements of the 183 day and the 91 day rules here and here and these give the way the days are counted in the UK.

Hth,

Boo

[BlasterBates]

Thanks people, there's some very creative thinking here!
I'm going to arrange to talk to an IOM accountant today & will report back. Logically, the idea of a UK LTD CO subcontracting to an IOM LTD CO seems a good way to go, I just hope Hector agrees!
Once again, thanks to all for the thoughts - I think I'm going to enjoy it here!

No that won't work (but you can double check with a UK accountant), because the sole employee and managing director of that company "you" will be doing all the work in the UK, so your IOM company would be expected to register a branch in the UK and you're back to square one.

Don't rely on the advice of an IOM accountant, he's an expert in IOM law not UK tax law and he's not liable if he screws up, always take advice from a UK accountant. Someone you can point to and can legally take the blame.

Foreign companies are liable for tax wherever they do business and are expected to register in each country where they do business.

[NotAllThere]

As a concession, if you leave the country and don't intend to return, then you can be treated as non-domiciled and non-resident as soon as you leave.

With respect to using an off-shore ltdco, there are two aspects.

1. Company taxation. If HMRC view your company as having a presence in the UK, then it will be subject to UK taxation. However, as suggested above, there are ways of ensuring that yourco makes no profit, so no tax is due.

2. Personal taxation. So long as you stay within the limits, you'll have no tax to pay in the UK. Note that under some circumstances, days of arrival and departure are counted as working days.

In my case, using a Swiss company in the UK five years ago for three months, I didn't get hit for personal taxation, as I wasn't there long enough, and my company paid all income (less expenses) out to me as an employee, and so the engagement in the UK made no profit, so no tax due. In CH, the dividend route is blocked by double taxation. Company pays tax on the profit, and shareholder pays tax on the dividend income.

There are agencies which have no problem with off-shore companies. The reason some are leery, is that if you abscond without paying due tax, the agency could get lumbered. They fear that the tax man will ignore your ltdco, and treat the agency as if they were your employer.

[BlasterBates]

If you work in the UK you should tax yourself there. You need to differentiate between personal tax residency and tax residency of a business. If you're physically doing the work in the UK and not in the IOM HMRC will expect their cut. Lets put it this way with a clever tax lawyer you might be able to argue that your business whatever that is is not really in the UK even though you turn up on Monday and go back Friday, but this won't be seen any differently by the HMRC than any other dodgy scheme and if they happened to spot you in an inspection you can bet they'd demand the tax. What you can avoid is personal Tax residency so any divis, interest you get in the IOM wouldn't be taxed.

My advice just set up a UK Ltd and have done with it, try to maintain your IOM residency and eek out any advantages. That's the only safe route, any other might or might not get you into trouble. But trouble wil be very expensive i.e. court battles, then interest on tax unpaid and possibly penalties on top. If it went sour (as frequently happened with UK residents running their foreign activiities through their UK Ltd) you'll end up with nothing.

[cssmonauts]

Thanks people, there's some very creative thinking here!
I'm going to arrange to talk to an IOM accountant today & will report back. Logically, the idea of a UK LTD CO subcontracting to an IOM LTD CO seems a good way to go, I just hope Hector agrees!
Once again, thanks to all for the thoughts - I think I'm going to enjoy it here!

[cssmonauts]

If the agencies won't deal with an IOM company (and I understand that most won't). could you set up a UK LTD and subcontract the work to your IOM LTD and then pay IOM taxes that way? (Presuming you are non-resident in the UK for tax purposes)

UK LTD makes no profit so no tax to pay in the UK and you can take advantage of the IOM tax laws.

OOOh, that sounds very clever! My Brother in Law has a UK LTD CO for his contracting, maybe we could do it through that...!

[DeludedAussie]

If the agencies won't deal with an IOM company (and I understand that most won't). could you set up a UK LTD and subcontract the work to your IOM LTD and then pay IOM taxes that way? (Presuming you are non-resident in the UK for tax purposes)

UK LTD makes no profit so no tax to pay in the UK and you can take advantage of the IOM tax laws.

This is exactly what I was thinking - Only downside is £1000 in accountant fees but apart from that nothing else

And you might be able to claim expenses twice

[alreadypacked]

Hello, Guys, Gals & Gurus

I've just joined up, having just secured a nice contract in the UK. A great site, have been up since 5am trawling through trying to find an answer to my particular issues (and Googling, obv) but to no avail. I'm hoping that someone here can help a confused newbie...

As the title says, I live on the Isle of Man, having come here 2 years ago for permanent role with an e-gaming company. I am an IOM resident, my house, family, bank accounts are all here, and I pay IOM tax. I even have a nice letter from HMRC stating that they weren't going to be interested anymore since I moved here.

My new contract is in the UK. Having read innumerable threads regarding LTDCO / UMBRELLA / COMPOSITE and the *great* schemes run out of IOM, none seem to cover my angle. Does anyone have a view on how I can maximise my income ? Does anyone here have similar experience?

Many thanks in advance!

Sorry cssmonauts, but Brussels Slumdog is correct you are not a non resident yet!
You need to stay out and earn your living outside the UK for 4 years. The non-dom stuff is not easy.
If you plan was workable everyone would do it. It may work for a short time, so good luck with it.

[Wanderer]

Yes, if this is the case then a UK LTD CO might be best.... certainly cheaper than setting up an IOM LTD CO.

If the agencies won't deal with an IOM company (and I understand that most won't). could you set up a UK LTD and subcontract the work to your IOM LTD and then pay IOM taxes that way? (Presuming you are non-resident in the UK for tax purposes)

UK LTD makes no profit so no tax to pay in the UK and you can take advantage of the IOM tax laws.

[cssmonauts]

You received a nice letter because

You left the UK to work abroad full-time, therefore you became a non resident and non ordinarily resident in the UK

Once you start working back in the UK then the following rule will apply

Your absence and employment from the UK did not cover a complete tax year (that is 6 April to 5 April) therefore the following rule applies ie You worked a couple of days

If spent more than 183 days in the UK during the tax year
or your visits to the UK average 91 days or more a tax year over a maximum of four years
Then welcome back to being a UK resident and can we have the tax on your world wide income.

The IOM is for the Idle rich or people working locally and not really ideal for IT contractors plus
IOM is not in the EU
My recommendation

Work in Switzerland where the tax rate is about 20% or a East European country where there is a flat rate tax

Yes, if this is the case then a UK LTD CO might be best.... certainly cheaper than setting up an IOM LTD CO.

IOM actually is a great place to live and that's why I continue to live there... I'm not looking to relocate. Plus, as you say, it's not part of the EU

As both the Agency & the Company knew I am IOM resident beofre giving me the job, I would certainly push the issue as hard as I can, but if HMRC are going to want their pound of flesh, there's probably no point, just go for a UK LTD and have done with it. Thanks for your thoughts!

[Brussels Slumdog]

Thanks for the contributions so far guys - nice to be unique!

I will be travelling & staying in the UK during the week, home at weekends. I've seen some things that say that if I work more the 180 days I might have to pay UK tax, so not sure. I guess an IOM accountant is my best bet given the circumstance. I will arrange to see one this week, and I will post what I find on here just on the off-chance it helps someone else

Does anyone know if IOM LTD CO's are acceptable to agencies / employers? I can't see any reason why not?

Normally not but let us know if you succeed as you are actually an IOM resident