Reply to: Advice For Expat On UK Contracting

[SallyPlanIT]

Hi JonJ

I have sent you a PM

Regards
Sally

[JonJ]

Oooh, sorry to confuse you! I wouldn't read the agency regulations, it was just as proof that it is law, not umbrella's being awkward.

Whether you trade as a limited company or through an umbrella largely depends on:
1) Length of contract
2) IR35 status
3) Contract hourly/daily rate

There are more tax savings to be made through limited company.
In an umbrella, all your expenses are tax free but your income is charged through PAYE.

If you would like me to call you and discuss in relation to you personally in detail, I'm happy to do so, please PM me your contact details.
I'm unavailable today but will be on Monday.

Thanks Sally,
I've been thinking about and researching this over the weekend, and I do now think that I have been confusing things as I have been interlinking two questions, which I need to view as separate. Which are;

1. How do I get a UK contract?
Go through a UK Umbrella or Ltd.

2. Do I have to pay tax in the UK and Germany?
I would be liable to pay UK income tax on UK earnings, but due to the Double Taxation Agreement between UK / Germany, may either be able to claim back a percentage of UK taxes paid or not be liable for them in Germany. I need to investigate this more to find the actual answer. The Accounting / Legal forum would be a better place to ask this.

The points you raise are also interesting. I'm not sure, as a non-resident looking to do a single 2-3 month contract in the UK, if setting up a limited company is practical, or shows too much commitment to the UK.

I'll send you a PM (assuming that as a newbie I am allowed to do that).

[cojak]

hahahaaaaa.....you can always rely on the internet for great advice



...your English isn't top notch either chum

Germany has quite a bit of contract work, on the whole German language skills are required. Depending on your exact circumstances and how you run things in the UK overall deductions can be (much) higher.

And talking about language skills, frankjj's English is perfectly acceptable and certainly better than most users foreign language skills on here.

Welcome frankjj.

[SallyPlanIT]

Thanks Sally. That looks like a lot to read through for tonight, so I'll have a look tomorrow.

I think I'm more confused than before.

My assumption is that in going through an umbrella company UK tax and NI will be deducted before I get paid. If I go through a limited company I will be liable to pay UK taxes. Have I understood at least this correctly?

As I was only looking at a short term UK contract as a way to give me more options, it seems like an impossible option to go through an agency (without paying tax in two countries and having to sort things out afterwards), and only possible if I contract with a company directly that I can invoice, which could be very difficult to find.

Or am I talking rubbish?

Oooh, sorry to confuse you! I wouldn't read the agency regulations, it was just as proof that it is law, not umbrella's being awkward.

Whether you trade as a limited company or through an umbrella largely depends on:
1) Length of contract
2) IR35 status
3) Contract hourly/daily rate

There are more tax savings to be made through limited company.
In an umbrella, all your expenses are tax free but your income is charged through PAYE.

If you would like me to call you and discuss in relation to you personally in detail, I'm happy to do so, please PM me your contact details.
I'm unavailable today but will be on Monday.

[JonJ]

Thanks Sally. That looks like a lot to read through for tonight, so I'll have a look tomorrow.

I think I'm more confused than before.

My assumption is that in going through an umbrella company UK tax and NI will be deducted before I get paid. If I go through a limited company I will be liable to pay UK taxes. Have I understood at least this correctly?

As I was only looking at a short term UK contract as a way to give me more options, it seems like an impossible option to go through an agency (without paying tax in two countries and having to sort things out afterwards), and only possible if I contract with a company directly that I can invoice, which could be very difficult to find.

Or am I talking rubbish?

[SallyPlanIT]

[QUOTE=JonJ;1169649
Is there a better way to explain this situation so I can stand a chance of being considered? Or is it that most agencies won't consider other options. If so, is it possible to recommend any agencies that would consider a German freelancer?

Thanks,
Jon.[/QUOTE]

The Agencies Act 2003 explains that Agencies can only use Umbrella or Limited Company, it's law, not their choice.

[JonJ]

A question for darmstadt, or anyone else knowledgeable.

I've tried applying for a number of UK contracts now, but the agencies always tell me its and umbrella or limited company only. I've explained that I'm a freelancer in Germany and liable to pay my taxes here, at which point they normally say not possible then.

Is there a better way to explain this situation so I can stand a chance of being considered? Or is it that most agencies won't consider other options. If so, is it possible to recommend any agencies that would consider a German freelancer?

Thanks,
Jon.

[JonJ]

@NotAllThere Thank you, that is very useful information about contracting in Switzerland. It seems rather expensive to set up if I only do the occasional contract, but it could be worthwhile for the right role.

@darmstadt Thank you all the great information. To be honest I'm not expecting to work out of the country that often, or anywhere near the 183 days, but you never know, and I'd rather find out now, than afterwards, and that is a great tip to b aware things. The bit about the umbrella company is particularly interesting as I was talking to another UK agent about a role in Germany and he was saying that that would need to go through an umbrella company. That seems even stranger than the UK requirement. When I started pushing him he did seem to feel there might be options, but it doesn't seem logical for me to work through another company, and have them deal with taxes, etc. Surely then I'm an employee rather than a freelancer? It would seem most logical for me to be able to contract directly with the client. Have you experienced this before, and if yes, how did you resolve it?

[darmstadt]

I'm a Freiberufler, no GmbH, don't want to go down that route and there is no need to. As to the 183 day law, I would be careful about that as you may be liable for taxes in other countries. I never managed to hit that (170 days out of Germany was all I managed) but I've always paid my taxes in Germany. I would suggest talking to your Steuerberater and if necessary get them to rite a letter stating that you are responsible for paying your taxes in the country where you are domiciled. This is what I did when I had to work in Holland once.

Tell the UK agency that due to German tax laws you cannot use an umbrella company (not quite true, but still...) and show them the above letter. Surely they can buy stuff from abroad and transfer the payment to a foreign bank which is basically what they are doing ith your services.

I do have liability insurance but I had to get that for one contract and for working with American companies (they're tulip scared of litigation!)

If you're really having problems you can start a UK Ltd. here in Germany now but its not too much fun such as having to submit your books to not only the Finanzamt but also Companies House. There is some information here: http://www.trust7.com/en/selbstaendig

[NotAllThere]

Agencies can be a bit wary, because if your company doesn't pay any tax that's due to HMRC, then they agency could be liable. And being outside of the UK would mean it would be harder for them to chase you.

If you wish to contract in Switzerland, you can be self-employed (sole trader), but will have to show three seperate clients, or you can go via a GmbH - which costs about 5'000CHF to set up, and you need 20K seed money. Or, and most commonly, you are an agency employee. Some agencies offer better conditions than others - e.g. allowing you to claim expenses against your fee, thereby lowering your tax liability. Of course, you need a work permit, but if your an EU citizen that isn't a problem.

[JonJ]

Thanks to everyone for responses so far.

@frankjj. I am told it is different in Germany. As I am conducting business as a freelancer, I have been told that I can work anywhere in the world and (as darmstadt says) invoice them without German VAT. There is no 183 day rule either (I am told), and potentially I could work abroad the whole year, as long as I show commitment to Germany being my home by coming back regularly, and paying my taxes here (which I have to submit monthly). I moved here seven years ago for a permanent job with a global US company and English was the only business language I ever needed. I am fairly new to contracting, but have found as Olly says that for the majority of contract jobs here some level of German language kills are required.

@darmstadt. Thank you for this confirmation, I was hoping that it was possible. Do you have a GmbH, or are you a freelancer? I'm a freelancer, and not sure how much more this complicates things, or if its possible to do. Do you need to take out liability insurance if you don't work as a limited company? Do you know if its as NotAllThere says for Germany, that any profit is liable to UK tax, this would be useful to know as you have the experience of working in other countries too. My Steuerberater advised me that I would only be liable to pay taxes in Germany, and it would be great to know if this is true in the real world.

@NotAllThere. I phoned one agent last week and he told me that I would need to have a UK Ltd. or work through an umbrella company to be able to do a UK contract, neither of which makes a lot of sense from a tax point of view, if I don't need to do it. So it is very useful to know that this is more down to agency policy, than law. I guess its just down to phoning about specific jobs and finding who will or won't work with you. I don't (currently) have a German GmbH, as this wasn't necessary for me to take contracts in Germany (at least I hope not), but if it is a requirement for other EU countries then I may need to investigate. Do you know what the situation is in Switzerland, would I be able to take contracts as a freelancer, or would I need a GmbH?

Thanks again to everyone for the great input.

[NotAllThere]

Some agents won't work with non-UK registered limited companies. However, where I've worked with those that do, I've just used my Swiss GmbH. Strictly, as I understand it, any profit generated for the Swiss company while in the UK, is subject to UK tax. In practice though, with a 3 month contract, it's easy to ensure that the contract generates no profit.

[Olly]

I can't help you much, but per my understanding if you work in a country you have to pay taxes there. How could be otherwise?

hahahaaaaa.....you can always rely on the internet for great advice

And how is working in Germany, is Germany language required? I would consider it but I don't know german.

...your English isn't top notch either chum

Germany has quite a bit of contract work, on the whole German language skills are required. Depending on your exact circumstances and how you run things in the UK overall deductions can be (much) higher.

[darmstadt]

I'm a Brit living and working in Germany. I am VAT registered in Germany as a freelance IT Consultant and am liable to pay my taxes, etc. here.

I'm exactly the same and have done short term contracts in the UK and other countries. All I did was send them an invoice but made sure that there was no VAT on it. They paid it into my German bank account. The only country I ever had a small problem with was Holland but that was cleared up pretty quick with a letter from my Steuerberater.

[frankjj]

I can't help you much, but per my understanding if you work in a country you have to pay taxes there. How could be otherwise? or probably you are talking of just healthcare taxes, which is around 8%.

Looking for a job in London is not a quick stuff at least per my experience, consider 2 months. However, depends a lot about how your skills and the sector you worked in match demand. There is a lot of competition and you have to go through recruiters.

And how is working in Germany, is Germany language required? I would consider it but I don't know german.

jj