Working for Oz company from the UK

[jamesbrown]

One more note, it appears James is right and I was wrong (might not be the first time that's happened, BTW ). If you are an employee, you probably will NOT (as I said) pay income tax through self-assessment and NI quarterly. You will almost certainly, as James said, have to set up a DPNI scheme and operate PAYE yourself, which will mean monthly payments.

More info, see the section on "Employee has to operate own Class 1 National Insurance", about halfway down. I don't know if you can deduct any transfer fees from your income or not. You obviously could as a contractor, but as an employee I'm not so sure. Seems like you should be able to in a sane world, but we're talking taxes here, so who knows? You'll probably have to ask an accountant or the tax man on that one.

Good luck with it all.

FWIW, I'm wrong about as often. I think the use of DPNI is compulsory, but I'm not certain, and it probably won't help to ask HMRC (an accountant would be best) In terms of expenses, I think the OP will be employed for all practical purposes so, like any other employee, they'll have to pay expenses out of taxed income, but it's definitely worth checking with an accountant.

[WordIsBond]

One more note, it appears James is right and I was wrong (might not be the first time that's happened, BTW ). If you are an employee, you probably will NOT (as I said) pay income tax through self-assessment and NI quarterly. You will almost certainly, as James said, have to set up a DPNI scheme and operate PAYE yourself, which will mean monthly payments.

More info, see the section on "Employee has to operate own Class 1 National Insurance", about halfway down. I don't know if you can deduct any transfer fees from your income or not. You obviously could as a contractor, but as an employee I'm not so sure. Seems like you should be able to in a sane world, but we're talking taxes here, so who knows? You'll probably have to ask an accountant or the tax man on that one.

Good luck with it all.

[cronemeister]

Cheers for the further replies guys, just wanted to answer/clear up a couple of things that people have mentioned.

1 - I'm an early riser so normally start about 6am Mon-Fri, which is 3pm in Oz so there's a 2-3 hour window where I can catchup with people and vice versa...its worked pretty well for the first 3 weeks.

2 - I enjoy working from home, although this is the first time I've done it ever so the novelty may wear off. I'm 40 years old and have two teenage kids (13 and 16) so the work life balance benefits of working from home don't necessarily apply to me anymore as much as they would have had the kids been a lot younger. I do however enjoy spending time with the missus and friends, golfing and squash etc so I can do 3-4 hours in the morning, go off and do something with the missus or friends and come back and do the remainder of my work later...no stress.

3 - I love the office banter and socialising etc etc so I do miss that aspect, however having the flexibility to do stuff during normal core working day hours (10-2) with friends, family or the missus (and kids when they're off school) would help with this aspect I would imagine. I thought I would struggle to focus on work whilst working from home but actually I find it a lot easier. There are less distractions than I was used to in the office (IT office) back in Oz so i'm actually finding that I'm doing a hell of a lot more work.

Being the only person in the organisation in my timezone may present some difficulties, but thus far this has not been an issue. I have been dealing with other 3rd party software/solution providers regarding recent projects I have worked on and this has all been done pretty seamlessly and without any impact to the business. In some respects it is working out better for these particular companies as well as they prefer to work out of hours for certain things as well so they have the ability of being able to get hold of me during my normal hours. I have all of my desk IT equipment (phone and laptop) here with me and its all connected via a sonicwall VPN box to the office/servers back in oz so people can still call me as if I were at my desk back there and vice versa :-) I can't imagine that they would have given me all this gear to bring back with me (about $7k's worth) to do a couple of months work for them.

Will take a look at the currency brokering thing. I get paid fortnightly into my oz bank account (ANZ) and it costs me $18 to transfer the money back here into my UK bank account, and I think the last time I did it I was getting something like 46p to the $, it was about 66p when I first moved out there :-(

Will let you know how things pan out...thanks once again for the info guys, it's much appreciated.

[jamesbrown]

Assuming the OP wants to remain employed, in their specific circumstances (foreign employer, outside the EU), my understanding is that they will need to operate a DPNI scheme, accounting for:

"An individual, who is required to pay their own PAYE Income Tax and NI. These include employees of [....]

A foreign employer who has no address in the United Kingdom from which earnings are paid"

Incidentally, this would differ for an EU employer, for which other schemes apply: see Note 2 in the above link.

One risk is that your employer inadvertently creates a permanent establishment in the UK through your activities, which they would presumably want to avoid. More on this here (if you aren't a subscriber, put it into Google first to access indirectly):

http://www.taxation.co.uk/taxation/A.../personal-paye

[mrv]

Instead, you can use a UK currency broker -- Caxton, HIFX, Moneycorp. You can have your foreign bank wire the funds to the currency broker, and they will convert to GBP at an exchange rate around 1% worse than interbank, and send it on to your own bank. The 1% is their profit on the deal. (Some brokers charge a small fee for transferring the money to your bank as well, but this can be negotiated).

Re exchange rates: you could open an account with a FX broker that allows accounts in both AUD and GBP (oanda comes to mind), then transfer in AUD, transfer out GBP. This way you would get actual interbank exchange rate, and your only real costs would be turnaround time (could take a week to get your final amount in) and wire costs, something like 20 - 30 GBP or AUD.

Also, when you have your account opened you could hedge against exchange rate movements yourself, if you decide you must. Very simple thing to do really.

[WordIsBond]

Either you or the company is going to suffer with the exchange rate, and team working will be difficult with the time difference (I know places the world over deal with this, but when the OP is the only person in his timezone it's not like he'll have a local team to interact with).

Depends on a lot of factors. How much of OP's work is independent, how much teamwork is needed?

Is OP an early riser? If so, he'll get some overlap on working day.

In some cases, having a team member be available to work late when others aren't working can be valuable.

Does OP like working at home, or do family situations make that a big plus for him? If so, this becomes attractive.

Does OP like working as a lone ranger, or is he a social person who will find it hard working alone all the time?

And on and on. There's no answer that fits everyone here. And exchange rates rise and fall. Somebody might get hurt now, but two years from now might be doing very, very well out of it.

[WordIsBond]

Glad to help.

If your value to them is lower because you are working from a distance, reopening salary negotiations might be a mistake. I don't know how much National Insurance (or whatever the Aussie equivalent is) is saving them, though.

I can't help on the currency exchange rate, other than to suggest you contact George Soros and ask him to short the pound and buy the Aussie dollar.

But I can help a little on currency issues. Most high street banks, if you pay in a foreign currency cheque, will give you an exchange rate 3-4% worse than interbank rate, and sit on your funds for two weeks or so until the cheque clears. If you wire the funds from your foreign bank, you eliminate the delay, but not the bad exchange rate.

Instead, you can use a UK currency broker -- Caxton, HIFX, Moneycorp. You can have your foreign bank wire the funds to the currency broker, and they will convert to GBP at an exchange rate around 1% worse than interbank, and send it on to your own bank. The 1% is their profit on the deal. (Some brokers charge a small fee for transferring the money to your bank as well, but this can be negotiated).

They won't take foreign cheques, or if they do, there will be a long delay. So you will have to do a wire transfer, which means a fee from your Aussie bank. So you might only want to do this every couple of months if you can manage that, to reduce the number of transfer fees you have to pay.

There may be other good currency brokers. Those three generally have a good reputation. Their margins vary. One may be 1% over interbank one day and 1.25% the next and 0.9% the next. Open accounts with at least two, and get an online quote from one then get a broker at the other on the line. Ask him for a quote, and if it is better than the online quote, accept. If it is worse, ask him if he wants to beat the online quote.

It won't solve the problem of a bad exchange rate, but why should your UK bank get 2-3% of your income every month just because they use an extortionate exchange rate?

Feel free to post with more questions as they come up, and if I can, I'll help.

As to the big question of employee/contractor, if you can stay outside IR35, you have to ask yourself if the things you gain by being an employee are worth more than a quarter of your income going to the tax man. For a lot of people, the security and other considerations are worth it. If you have good benefits as an employee, you don't want to walk away from that without it being reflected in your rate.

This may also be helpful: https://www.gov.uk/government/collec...l-calculations. You can use their calculators to figure out how much tax and employee's NI you would pay, on your income. Put it in a spreadsheet and then, in another column, the value of all the benefits you receive as an employee.

Good luck!

[jmo21]

Seems like an awful lot of hassle to keep a job, even if it does turn into a contract.

Either you or the company is going to suffer with the exchange rate, and team working will be difficult with the time difference (I know places the world over deal with this, but when the OP is the only person in his timezone it's not like he'll have a local team to interact with).

[cronemeister]

Thank you :-)

4. Set up a limited company and operate under IR35. If this company is going to be your only client, you may be under IR35. Probably would be, but it might depend on how much control they have over your work and what kind of mutual obligations you agree. Read up on IR35.

If you are going to operate under IR35, there are really only two reasons to form a limited company. The first would be liability -- if things go pear-shaped and the company sues you, a limited company means they can only sue the company, not you personally. You don't lose your home or savings, etc. Maybe your relationship is such that you aren't worried about this....

The second is if you are going to make large pension contributions. Pension contributions are a deductible expense for a limited company, even if you are under IR35. I believe, though, that a self-employed person makes pension contributions personally, and so still has to pay NI contributions on the amount. So if you are going to make very large pension contributions, a limited company under IR35 may be preferable to self-employment. An accountant would help you do the sums.

5. Set up a limited company and operate outside IR35. Get the company to agree an IR35 friendly contract. Try to find other clients, even if only for very limited work. Join IPSE. Buy IR35 insurance. If your contract is good and you are looking for other clients, it will be very hard for HMRC to prove you are a disguised employee. Sure, you were an employee before, but you've left the country, hardly the classic Monday/Friday scenario.

Your client may not like some of the IR35-friendly provisions, and insist on provisions that would be troublesome. So this may not be an option, but if it is, the tax benefits are very, very significant.

And if you have a very stable marriage and no concerns about the risks involved, you can make your wife a shareholder / director, ask her to do your bookkeeping and answer phones for you, and the tax benefits can be even greater. Read the First Timers guide here, read the IR35 and S660 and Limited Companies guides (links to the right).

This is a little more work but that work pays a LOT in saved taxes compared to all the other alternatives.

OK, I'm done. I did something somewhat similar, so I investigated all of this. I'll send you an invoice.

I cannot thank you enough for all of the time and effort you have taken to reply to my post/questions/general dilemma in a most comprehensive fashion.

My preference of course would be to continue on as a full time employee of the company. The fact that I have no right to live or work in Australia anymore since my visa has expired is irrelevant. The first link you sent me to taxaid is great, but I'm not sure which bracket I fall into (2 or 3), and I guess until the company decide on which way they prefer to go it won't become clearer to me. If it's easy enough to continue with the current arrangement then I see no need to change, unless they find someone local to fill the position.

My cousin is a chartered accountant so I'm hoping that I can perhaps leverage off that and get a bit of free startup advice from her.

I had every intention of trying to negotiate something with them regarding higher salary etc, especially given the fact that we all had out annual reviews before I left which in turn reflects salary increments and/or bonuses for the following year (tax year is July-June over there). One thing that is not in my favour however is the bloody exchange rate. When I moved out there it was 65p to the $, now it's round about 50p to the $...which when calculated back to £ means that on my current salary I am about £10k worse off than when I went out there :-(

I think whilst remaining an employee of the company is the easiest option all round, financially this may the worst one for me but until we have these discussions then I guess its a case of we don't know what we don't know.

Once again thank you so much for your time, you have given me more information in your replies than I have been able to find following hours and hours of googling and reading and making phone calls.

[WordIsBond]

4. Set up a limited company and operate under IR35. If this company is going to be your only client, you may be under IR35. Probably would be, but it might depend on how much control they have over your work and what kind of mutual obligations you agree. Read up on IR35.

If you are going to operate under IR35, there are really only two reasons to form a limited company. The first would be liability -- if things go pear-shaped and the company sues you, a limited company means they can only sue the company, not you personally. You don't lose your home or savings, etc. Maybe your relationship is such that you aren't worried about this....

The second is if you are going to make large pension contributions. Pension contributions are a deductible expense for a limited company, even if you are under IR35. I believe, though, that a self-employed person makes pension contributions personally, and so still has to pay NI contributions on the amount. So if you are going to make very large pension contributions, a limited company under IR35 may be preferable to self-employment. An accountant would help you do the sums.

5. Set up a limited company and operate outside IR35. Get the company to agree an IR35 friendly contract. Try to find other clients, even if only for very limited work. Join IPSE. Buy IR35 insurance. If your contract is good and you are looking for other clients, it will be very hard for HMRC to prove you are a disguised employee. Sure, you were an employee before, but you've left the country, hardly the classic Monday/Friday scenario.

Your client may not like some of the IR35-friendly provisions, and insist on provisions that would be troublesome. So this may not be an option, but if it is, the tax benefits are very, very significant.

And if you have a very stable marriage and no concerns about the risks involved, you can make your wife a shareholder / director, ask her to do your bookkeeping and answer phones for you, and the tax benefits can be even greater. Read the First Timers guide here, read the IR35 and S660 and Limited Companies guides (links to the right).

This is a little more work but that work pays a LOT in saved taxes compared to all the other alternatives.

OK, I'm done. I did something somewhat similar, so I investigated all of this. I'll send you an invoice.

[WordIsBond]

3. Your next option is to be self-employed. Everything I said about negotiating a rate to cover benefits, etc, applies.

This is the second most tax-efficient way to go. A lot of contractors can't do this because no UK company wants to have self-employed contractors -- the company is on the hook if HMRC decides you are an employee. That's not an issue for you, because your client is immune to HMRC. So you could go self-employed.

You would sign contracts with the company, and they would pay you for work done. You could deduct any expenses (accountant, phone bills, broadband if needed for work, etc) incurred solely for business purposes. The remaining funds would be your profit.

Your taxes would be on the profit: Income tax, and class 2 and 4 NI (rates: https://www.gov.uk/self-employed-nat...nsurance-rates).

Compared to an umbrella, you only pay 9% NI in the main band vs 12% under the umbrella, and you pay class 2 NI (£2.80 per week) rather than the 13.8% employer's NI. So you are about 15% better off than you would be with an umbrella.

And, you only pay your taxes every six months, so you can open the savings accounts I mentioned above and put the taxes in every month, take it out every six months, but you've earned interest on it all that time. If you go self-employed now, your first taxes won't be due until January 2017, but you had better be sure to save for it, because it will be a huge bill when it comes. That's not a bad thing if you save the money for it, it just means you get the interest on it instead of the government.

Paperwork/accounting is pretty easy. If you aren't good at that stuff, pay an accountant to help you the first year (that's a business expense you can deduct from profit), and after that you'll know what to do and can handle it yourself.

More to come....

[WordIsBond]

1. Yes, of course you can be employed in the UK by a foreign company, if that is what you and the company want to do. Read here: Overseas Employers « TaxAid.

You will have to pay income tax through self-assessment, payments made semiannually, and almost certainly National Insurance (payments quarterly). Your employer will not have to pay employer's National Insurance, so you might be able to negotiate a higher salary since they won't have payroll taxes. (Although I suppose they might have some kind of tax in Oz, I don't know anything about that.)

If you are working out of your home, you may be able to deduct a little bit for business use of home. If you aren't eligible for their Oz pension scheme, you should try to find a pension provider that will accept payments on your behalf from an Aussie firm. Otherwise, you will have to make the pension payments yourself -- but you will have had to pay NI on that amount, so it is better if they make the payments. But some pension providers won't accept payments from foreign companies, they insist on the corporation number. That may be a legal requirement, I don't know.

If you go this route, open regular savers savings accounts (First Direct has one paying 6%, I think). Every month, put the taxes due for that month into your regular saver account. Every quarter, take enough out to pay the NI, every six months enough out to pay the income tax -- but you are earning interest all the time. Since you'll be taking the money out, you don't want to use your ISA for this purpose. But over time, the interest will add up, if you do this for long. It will make a nice holiday sometime.

This is not that difficult to do, and HMRC will be glad to help you know when to pay and how much. They'll be glad you are doing it this way, because it is an expensive way to go.

If you want the security of being an employee, and/or they have really good benefits you don't want to lose, this may be the most appealing option.

If you don't go this way, make sure you negotiate a rate that reflects the benefits you are losing. Paid holidays, sick leave, maternity/paternity leave, insurance, etc, etc. Go through your employee manual and figure out everything you are losing that you value and what it would cost to replace it. Also factor in how much they were paying in payroll / national insurance taxes. They are saving that money now, try to get at least most of it included in your rate.

They may want to cut your rate some for being out of the country, different time zone, higher phone bills, all that. That's fair. But they are saving money, too, so try to get a rate that reflects that as well.

2. You could work through an umbrella. This is the easiest option, but also the most expensive. Just like the last option, you'll pay NI and income tax, but it will be paid every month, so you don't get the little bonus of the interest. Worse, the umbrella is your employer, so they take their fee plus they have to pay employer's NI (13.8%). All of that comes out of what you are earning.

But if you aren't disciplined, if you would spend the tax money rather than save it until it is due, or if you don't want to learn / understand about IR35 or learn to operate a limited company (it's not hard but a lot of people can't be bothered), this is the option for you.

I personally wouldn't touch either of these options with a barge pole. Since this comment is already long, I'll talk about the others in a second comment.

[cronemeister]

Good Afternoon everyone.

Another newbie here - please be gentle :-) !

Firstly what a fantastic forum, I've spent the last hour looking through the range of information that is available on here and WOW...there's a lot.

I have a bit of a situation going on and despite my efforts on google, and to a lesser extent looking in the threads on this forum, I'm still struggling to get the questions I have in my head answered.

So I have recently moved back to the UK at very short notice from Australia (I'm a UK citizen and don't have Oz citizenship). I moved over there 3 years ago on a 457 Visa to work for a water utility company. My family and I have had to return to the UK at short notice due to some health issues with my wife however the company I was working for in Australia want me to continue to work for them from back here in the UK. They are solely an Australian company and therefore have no offices anywhere else in the world - queue question 1 :-

1 - Can they keep me on as a full-time employee ?

If this is possible then I guess all I need to sort out with them is the remuneration package and whether I continue to have my salary paid into my Australian bank account or get them to pay it into my UK bank account - I guess either or doesn't really matter and I will have to negotiate something with them to account for exchange rate fluctuations. When I moved out there we were getting 66p to the $, now that's down to about 46p.

I suspect that the answer to Q1 is a resounding No although as I mentioned above I cannot find any information to confirm either way. So assuming this to be the case and from what I've already found out via google and some friends, the options available to me are (please correct me if I'm wrong) :-

• Register with an umbrella company
• Set up my own Ltd company
• Become an individual contractor working for the company

I have only ever been a full time employee since leaving school (25 years ago..yikes) so this is all a bit daunting to me as I'm literally clueless in terms of the options available to me, which one is best and how I get the ball rolling etc.

There is loads of stuff on the net about working for a UK company from Oz, but nothing (or at least nothing that I could find) about doing it the other way. I made a bunch of calls on Friday and got nowhere very slowly other than a whole bunch of phone numbers to ring around today - then I thought about looking for a forum to help me out...and here I am.

I keep thinking that my situation can't be that unusual, there are bound to be hundreds of people who live in the UK but work for overseas companies from home, it's an absolute minefield trying to find out how it all works especially as I've never had to do it before so I'm hoping that some of you more knowledgeable people on this subject can point me in the right direction.

Obviously if I need to set up myself from this end then I need to consider tax, ni, pension contributions, workplace insurance (?) and also the startup costs for whichever option is the best way forward.

Thank you in advance for any advice you may be able to chuck my way.