Contract working in Europe

[benson99]

Hello All,

I am British

I am working in Europe as a boat builder on various projects. A contract can last up to 8 or 9 months. I have not worked or intend to work in the UK and have spent less than 90 days there over 4/5 years. I have paid tax in the UK but want to see if I have an alternative option available.

I have started to look into setting up a company in somewhere like Cyprus or Gibraltar to reduce my tax bill. Please could someone help explain how this works?

Can I work through my new company that is registered in Cyprus (for example)? If so how long? Will I still be limited by the 184 days rule that means I become a tax resident of that country?

I have found many companies that can set up a company for me and open a bank account. However, they also will provide me with an “office” and other services but charge in excess of 1500 euros a year. Can I do this without these non-required services included?

If it is a nonresident company where is my personal residency? The current company I am working for has asked for a tax residence certificate.

How do I get the money out of the company? If I take a large amount back to the UK will I be taxed on it?

Can I go back to the UK to work, invoicing from this new company?

What other considerations are there?

If you have a recommendation for a good accountant please leave details.

Thanks for all your help!

Benson

[etf]

Hi Benson99,

This reply does not cover all of your questions, especially the non-UK issues, but may help as a starting point.

Let's assume over the past 4-5 years:

- you have operated through your own UK company;

- your UK company has assigned you from one overseas assignment to the next with no gap in between;

- you have withdrawn all surplus company profits as salary/bonus.

Given the above facts, it is possible that HMRC would accept a claim that you are regarded as not resident and not ordinarily (NR/NOR) for UK tax purposes on the basis that you have remained in full-time employment overseas for a period encompassing a complete UK tax year and your return visits to the UK have remained within permitted tolerances.

If a NR/NOR claim is accepted, you would not be liable to UK tax on your earnings for the work you have performed outside the UK and your company would not be liable to pay any UK corporation tax as there is no profit left to tax. From a UK tax perspective that is very efficient although potential VAT and national insurance issues also need to be considered.

However, you also need to consider whether your boat building activities in the countries where you are working will trigger any filing obligations for you and your UK company.

From a personal tax perspective, it is unlikely that you will be able to rely on a 183 day tax exemption under a Double Tax Treaty. In explanation, tax treaties in regard to employment income generally limit the taxing rights of the country in which the earnings have their source (where employment duties are performed) in favour of the country in which the employee is resident. If you are claiming that you are not resident in both countries then the tax treaty exemption in the source country will not be available i.e. tax treaties are intended to stop double taxation, not to produce zero taxation.

The above summary shows that whilst it might be possible to pay little/no UK tax, it will be a wasted effort if overseas taxes are higher.

Kind Regards

etf