Self employed in UK, tax resident in France

[cognac16]

Currently tax resident in France, I have the possibility of working in the UK on a self employed basis. This would be my only earned income, although my husband is registered and working (self employed) in France.

The work will be undertaken in the UK for a UK company and I understand that I will be liable to UK tax and NI, with no further liability to tax or social charges in France, other than any amount earned counting towards the effective tax rate for our French tax return as long as the work is performed from a "Permanent Establishment" within the UK.

Any advice would be gratefully received. I am concerned that the UK income would become liable to further tax and social charges in France which would leave me with omly a small amount of net income.

Many thanks in advance

[innovativetax]

Double taxation relief may be available if the UK source income is subject to French Tax. Depending on the provision of the double taxation agreement between the UK & France, UK may have a taxing right.

Odiri Tax Consultants.
www.odiritaxconsultants.com

[Michael I. Atlas, CA]

Keep in mind the fact that, when acessing whether you are protected from UK taxation under the tax treaty between UK and France, in order for UK to have taxing power, YOU must have a permanent establishment ("PE")(or "fixed base", depending on wording of applicable provision) in UK. The test is not whether the work is performed "from" a PE in UK.

For example, based on case law in this country (I am not sure whether there is any in UK), in the fairly typical situation where a self-employed consultant works on the premises of a client, even for an extended period, that would NOT be a PE of the consultant, because normally those premises, even if there is a designated office of the consultant, would not be under the control of that consultant.

[Michael I. Atlas, CA]

Word in first line should have been "assessing"

[maths]

Michael

I was intrigued by your last post.

The OECD Commentary makes it clear that the p/e does not need to belong to the person carrying out the activities to constitute a p/e.

There are no decided cases here in the UK on the point.

[Michael I. Atlas, CA]

I am not sure what you mean by "belong". Certainly, the taxpayer in question need not own the premises. However, if must be a PE of the non-resident taxpayer. The fact that it is a PE of the client is not what is relevant.

Admittedly, the OECD Commentary doesthat "no formal legal right to use that place" is required. However, the commentary does indicate that the place must be "at the disposal" of the person, implying some degree of control.

There is a famous case called Dudney that dealt with this issue within the context of the Canada-US Tax Convention.

Dudney was a self-employed IT consultant that worked in the offices of an oil company in Western Canada for over a year, doing the usual IT consulting type stuff.

Both the Tax Court of Canada and the Federal Court of Appeal held that he did not have a "fixed base" in Canada for the purposes of the treaty (which was considered to be the same as a PE).

I believe that Dudney's situation is fairly typical.

In fact, it was because of this case and similar ones that the Canada-US Tax Convention was recently amended to provide for a deemed PE in certain cases like that (generally where where present in Canada providing services for more that 183 days in 12 month period).

[cognac16]

Thanks to everyone who has replied. I've just lifted this from the HMRC website:

"INTM266050 - Non-residents trading in the UK: Treaty permanent establishment
Fixed place of business permanent establishment
One of the two circumstances in which there can be a treaty permanent establishment is where there is a fixed place of business in one treaty partner’s territory through which the business of an enterprise resident in the other treaty partner’s territory is wholly or partly carried on – Model treaty Article 5(1).

This definition therefore contains the following essential features, all of which must be present:

a.there must be a geographic place of business, possibly premises or a site, although it can, in certain circumstances, be machinery or equipment.
b.the place of business must be fixed, that is, have a certain degree of permanence, and
c.the non-resident’s business must be carried on through this fixed place of business, normally by the personnel of the enterprise."

I am now considering whether the work could be undertaken as an employee rather than self employed. If the work becomes liable to social charges in France it probably wouldn't be worth undertaking as they are notoriously high on self employed income.