Working abroad remains an attractive option for many UK contractors, offering alternative opportunities, and the potential to save on taxes, under certain circumstances.
However, as Mike Keeling, Operations Director of One Click Group explains, there can be administrative challenges contractors face.
“If you’ve got the right transferable skills, working abroad has never been easier. But getting your paperwork in order still matters, otherwise you can risk getting caught up in the UK’s labyrinth tax system.”
What are the Tax Implications?
For anyone working abroad for a short period of time, a few weeks or months, tax should not be a problem. However, when considering working abroad on a more permanent basis, for a period of three or more years, then your tax status can become an issue.
“If you are working abroad for three years or more, then you will be treated as a non-resident in the UK, from your date of departure, meaning you will no longer need to pay UK tax”
The situation gets more complex, however, where a contractor is returning to the UK more frequently.
“This could mean you’ll remain a resident, and therefore you’ll be liable to still pay UK tax, unless you meet certain conditions.”
To avoid being liable to pay UK tax, these visits back to the UK must:
- Be less than 183 days in any tax year, or
- Only average 91 days per tax year over a period of four years
“HMRC also takes into account family, social and work ties, and whether you have a house in the UK.”
You could end up having your tax adjusted and only pay tax and capital gains for that part of the year you are resident in the UK, under something known as split-year treatment.
“If you’re already paying tax in the country in which you’re contracted to work, then this may have further implications for you.”
Contractors may also be able to claim expenses when visiting another country for the sole purpose of fulfilling a contract.
What Must Contractors Consider?
“You must be fully aware of the documents you’ll need for working abroad, and, currently, working outside the EU will require some sort of visa. In fact, some agencies will not employ you without one.”
There may also be permit applications to consider, along with the issue of tax compliance with whatever local rules are in force.
“Tax regimes in every country are different so you will need local advice about your potential liability for tax or social security”
Contractors should also consider their earnings when abroad, and how they receive them.
“Taking some of your earnings as sterling will mean exchange rate risks, and you’re likely to have some transfer costs. It usually makes sense to make smaller transfers regularly, rather than large sums.”
Making the Transition Simpler and Faster
One solution for contractors looking to work abroad is to use the services of an umbrella company. This can make the transition to working in a foreign market simple and quick.
“An international payroll service will ensure you remain fully tax compliant, wherever you work, and also means having reassurance that you won’t end up paying more than you should be”
“As an option for contractors working abroad, an umbrella company can help with all the necessary qualifying paperwork, and look at things such as insurance and credit ratings,” Mike concludes. “It’s all about making things as streamlined and straightforward as possible.”
To discover how One Click Group can help you deal with the challenges that come with choosing to work abroad, without limiting your opportunities, please call 0345 557 1287 or visit oneclickgroupuk.com.
