By Martin Hesketh, Managing Director, Brookson
With current exchange rates making British professionals something of a bargain on the international skills market, Martin Hesketh, managing director of Brookson, outlines in this articole some of the possible tax implications. For those wishing to follow this ‘export opportunity’ and accept work outside of the UK, he recommends contractors should seek advice BEFORE accepting their overseas contract.
Learn from past experience
Recent cases have proven that it is essential to seek professional advice before accepting overseas contracts as there could be hidden costs associated with such a move. HMRC (Her Majesty’s Revenue and Customs) is keen to deal with the issue of tax avoidance through offshore vehicles, and while overseas working is an entirely different issue, poor advice can all too easily cause contractors to fall foul of UK tax requirements.
For instance, there is a concession which allows those working outside the UK on a full time contract, which spans a complete tax year, to become non-UK resident for the period spent working overseas. However, the rules governing compliance with this concession are complex and intertwined with the tax requirements of the country in which the contractor is working. Brookson would therefore always advise contractors to ensure they have considered their tax implications before taking the plunge with either short-term or long-term overseas contracts.
Although there were no additional measures introduced in the recent Budget announcement, the need to ensure compliance when dealing with tax issues around overseas working continues. HMRC maintains a focus on UK contractors working overseas, and measures announced in previously published initiatives signal that the government is still keen to tighten regulations around UK subjects operating in overseas tax jurisdictions.
It is also important to asses all options of working such as limited companies or Umbrella as getting the working arrangement wrong could be costly:
The primary tax issue to consider here is the tax residency of both you and your limited company. If you are working overseas via your own UK limited company, you and your company may end up being liable for tax in the UK and the country you are working in, thus paying taxes in both countries. While you will usually be able to claim ‘double tax’ relief it is however important that you seek advice to ensure you remain compliant and you understand how much tax you will be paying as this may be more than you might initially expect.
As a general rule, Brookson would not recommend working on an overseas contract via your UK limited company for more than 6 months as the risk of becoming ’dual resident’ for tax purposes is increased. In these situations it is important that expert advice is sought to ensure that your overseas affairs are managed compliantly and your continuing UK tax obligations are met.
UK based Umbrella services are usually only designed for assignments based in the UK, although occasional work outside the UK under a UK contract for short periods of time is generally acceptable.
If the assignment is under a non-UK contract with duties performed outside the UK, the associated tax risks do not make working via a UK umbrella company attractive.
This is a complex area and contractors will need to consider their own personal tax in respect of their specific situation. As a result we would recommend that a purpose designed overseas solution is sought.
In respect of our ever changing customers’ needs, Brookson has tailored an overseas service that will deal with all ongoing UK tax and accountancy needs during any time spent working abroad and upon return. We can offer guidance to highlight the risks and ensure customers are working compliantly. Through our carefully selected business partners we can also work with specialist advisors in overseas jurisdictions and extend our service to provide an overall solution to overseas working
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