Reply to: Corporate Directors a stalking horse for privatized oversight of self-employed?

[BlasterBates]

Hmm I don't know who to believe the "official guidance" given on this site at http://www.contractoruk.com/overseas_guides/index.html or Ltd co. director not paying their corporation tax in the right country.

I may not have understood the guidance fully but then I have not finished reading it all.

Yes of course you pay tax in the country you operate. The point raised was that the form of company in other EU countries is quite different from the UK. The EU allows you set to set up one legal entity, such as British Ltd, but obviously you need to register your company where you do business. This thread is not about tax but the structure of company allowed.

In fact in Germany many new businesses are registered in the UK because it is cheaper to set up a UK Ltd than a German GmbH, however they do pay German tax.

[ASB]

Because it is not similar: the centre of Acme Telecoms Ltd's economic interests remains in the UK, whereas if YouCo's only business is your coding, when you go to France, the centre of YourCo's economic interests moves with you.

That will, however, depend on the individual circumstances. Specifically France I was spending some time in France, some time in the UK. Generally commuting weekly, though I did in fact have a flat in Paris as well. There was certainly no suggestion that I was going to become French tax resident (not enough days) or that the business was going to become French tax resident (the French work was a substantial portion of turnover however MyCo did do other things still UK based).

I don't dispute what you say, it is certainly possible for both individual and corporate residency to move. But it doesn't have to.

[MPwannadecentincome]

Because it is not similar: the centre of Acme Telecoms Ltd's economic interests remains in the UK, whereas if YouCo's only business is your coding, when you go to France, the centre of YourCo's economic interests moves with you.

BTW it is far from true that you can't run your own business in other EU countries. E.g. in Germany, as BlasterBates says, you don't need a company, you can just work as a freelance individual. If you want a company, forming a GmbH is no sweat. The capital required is 20000 EUR instead of 100 GBP, and it does actually have to be subscribed; but it's no difficulty, just a real capital requirement. (Or I may be confusing it with Switzerland for the exact sum, but the point is the same).

Likewise in France, you can just work as a freelance individual, and most contractors do. It is all part of the system, you are classified as "profession liberale" which is described as "self-employed knowledge worker". No problem. Again, if you want to form a company you can. The smallest option is EURL (Entreprise Unipersonnel a Responsabilite Limitee) which is specifically a one-person company. But actually there is no reason for an IT contractor do do this.

Just as there is no good reason in the UK for an IT contractor to form a Ltd Co rather than just work as a freelance individual, except that successive governments, regardless of stripe, have made it necessary by not believing in self-employed knowledge workers.

It is, frankly, not the rest of Europe that makes it difficult.

What is different about the UK is that there is one tax (NICs) that is only levied on one class of income, which gives an obvious incentive for workers to try to classify their income as being of a different kind, and tax-collectors to try to stop them. The folly is in this difference. In France the taxman doesn't care what form of business you run, you're paying the same tax anyway. That IMHO is because they correctly see the things that NICs pay for as being welfare state, not insurance. Thus all income is liable for it.

It is not that you can't form your own company in the rest of Europe, it is just that doing so does not let you escape from any tax.

I think the other difference is that the social insurance rates in Europe are much higher thus the net take home is not so attractive whether you are self employed or employed? I am speculating here as I have not investigated.

[MPwannadecentincome]

I've never really understood the confusion over this.

If I'm working as a permie for company acme telecoms ltd and they send me to France for a few weeks running, then I wouldn't have to start registering for tax over there and paying French tax

Similarly, the company that I own, sends me over to europe for a few days (3-5) a week for a few weeks then why should I suddenly have to start paying tax in which ever country I happen to be in.

I'm a full time resident of the UK, registered as a director for a UK company doing legitimate cross border trade in europe.

If i upped sticks and moved to europe full time then i could see the issue, but then i think that conflicts with being a registered director of a UK company without being a resident.

I am sure it is a grey area but something to do with where management and supervisory control exists for the ltd company if there is only one director.

A few weeks is not an issue I think, it could be that the limit is how many days per year you are in the country etc.

[expat]

I've never really understood the confusion over this.

If I'm working as a permie for company acme telecoms ltd and they send me to France for a few weeks running, then I wouldn't have to start registering for tax over there and paying French tax

Similarly, the company that I own, sends me over to europe for a few days (3-5) a week for a few weeks then why should I suddenly have to start paying tax in which ever country I happen to be in.

Because it is not similar: the centre of Acme Telecoms Ltd's economic interests remains in the UK, whereas if YouCo's only business is your coding, when you go to France, the centre of YourCo's economic interests moves with you.

BTW it is far from true that you can't run your own business in other EU countries. E.g. in Germany, as BlasterBates says, you don't need a company, you can just work as a freelance individual. If you want a company, forming a GmbH is no sweat. The capital required is 20000 EUR instead of 100 GBP, and it does actually have to be subscribed; but it's no difficulty, just a real capital requirement. (Or I may be confusing it with Switzerland for the exact sum, but the point is the same).

Likewise in France, you can just work as a freelance individual, and most contractors do. It is all part of the system, you are classified as "profession liberale" which is described as "self-employed knowledge worker". No problem. Again, if you want to form a company you can. The smallest option is EURL (Entreprise Unipersonnel a Responsabilite Limitee) which is specifically a one-person company. But actually there is no reason for an IT contractor do do this.

Just as there is no good reason in the UK for an IT contractor to form a Ltd Co rather than just work as a freelance individual, except that successive governments, regardless of stripe, have made it necessary by not believing in self-employed knowledge workers.

It is, frankly, not the rest of Europe that makes it difficult.

What is different about the UK is that there is one tax (NICs) that is only levied on one class of income, which gives an obvious incentive for workers to try to classify their income as being of a different kind, and tax-collectors to try to stop them. The folly is in this difference. In France the taxman doesn't care what form of business you run, you're paying the same tax anyway. That IMHO is because they correctly see the things that NICs pay for as being welfare state, not insurance. Thus all income is liable for it.

It is not that you can't form your own company in the rest of Europe, it is just that doing so does not let you escape from any tax.

[ASB]

If I'm working as a permie for company acme telecoms ltd and they send me to France for a few weeks running, then I wouldn't have to start registering for tax over there and paying French tax

Similarly, the company that I own, sends me over to europe for a few days (3-5) a week for a few weeks then why should I suddenly have to start paying tax in which ever country I happen to be in.

Well, some thoughts. In the former case that's fine. But what if they send you to France for 10 weeks, 20, 30 or more ?

In that case depending upon French residency and tax rules then the possibility of becoming resident exists.

In the latter case it is broadly the same, however there is another issue - seat of control of your business. That can affect in some places your residency and tax status.

It is perfectly possible to be living in the UK and working in various countries and tax resident in those countries, doesn't matter if you are a contractor or a permie.

Equally, if you are broadly living in the UK it is perfectly possible to do the above without being resident in any of the other countries (or possibly even the UK)

[oraclesmith]

Sounds like a good business opportunity to me. Set up a plc and sign up loads of contractor's limited's at a modest annual fee to 'oversee'.

Keeeerrching !

[Spacecadet]

By the way you can operate a UK Ltd anywhere in Europe.

There seems to be a lot of myths flying around.

I've never really understood the confusion over this.

If I'm working as a permie for company acme telecoms ltd and they send me to France for a few weeks running, then I wouldn't have to start registering for tax over there and paying French tax

Similarly, the company that I own, sends me over to europe for a few days (3-5) a week for a few weeks then why should I suddenly have to start paying tax in which ever country I happen to be in.

I'm a full time resident of the UK, registered as a director for a UK company doing legitimate cross border trade in europe.

If i upped sticks and moved to europe full time then i could see the issue, but then i think that conflicts with being a registered director of a UK company without being a resident.

[MPwannadecentincome]

huh?

Having operated in several countries, this is just not true.

In fact the simplest place to operate is Germany, where you don't even have to set up a company, you just send a bill, and you can be a single person company.

By the way you can operate a UK Ltd anywhere in Europe.

There seems to be a lot of myths flying around.

Hmm I don't know who to believe the "official guidance" given on this site at http://www.contractoruk.com/overseas_guides/index.html or Ltd co. director not paying their corporation tax in the right country.

I may not have understood the guidance fully but then I have not finished reading it all.

[BlasterBates]

Its a serious point as I have posted elsewhere this week the UK is out of line with most of the EU countries on allowing single person ltd companies etc.

huh?

Having operated in several countries, this is just not true.

In fact the simplest place to operate is Germany, where you don't even have to set up a company, you just send a bill, and you can be a single person company.

By the way you can operate a UK Ltd anywhere in Europe.

There seems to be a lot of myths flying around.

[MPwannadecentincome]

Its a serious point as I have posted elsewhere this week the UK is out of line with most of the EU countries on allowing single person ltd companies etc. So I would enjoy the benefits whilst they last it is only a matter of time, in my opinion, no matter how much anyone protests, before the ability to save tax by paying dividends and offsetting lots of expenses will be taken away completely.

And with all the bailouts going on now and lack of stamp duty transactions the gov is SERIOUSLY short of money, they will look to find it wherever they can without putting up the headline rate of tax.

[Xenophon]

Is that a diplomatic way of saying you think it's a load of hogwash?

I wouldn't dispute there's a good chance it is. Let's hope so anyway!

(But with all these bail outs, Governments will need shedloads more cash, and if more people become self-employed they'll be an increasingly inviting target.)

You got me.

[Xenophon]

WTF does WHS mean?

Can someone tell me or shoudl I DMOR or alternatively I can FOAD but I think thats a bit extreme in these circumstances.

What He Said

Variations:

WSS What She Said

WTS What They Said

Xeno in 'helpful' mode

[OwlHoot]

Interesting, OwlHoot.

Let's hope we can add this one to the CUK Myths thread.

Is that a diplomatic way of saying you think it's a load of hogwash?

I wouldn't dispute there's a good chance it is. Let's hope so anyway!

(But with all these bail outs, Governments will need shedloads more cash, and if more people become self-employed they'll be an increasingly inviting target.)

[expat]

WTF does WHS mean?

Can someone tell me or shoudl I DMOR or alternatively I can FOAD but I think thats a bit extreme in these circumstances.

WGAF?

IGMC