Contractors’ Questions: How to be an overseas company’s UK representative?

Contractor’s Question: I have been approached by an overseas business to act as their representative in the UK. They don't have a physical presence here nor do they intend to have one other than for the sake of verifying an address for google ads. This business is in the category of Web Design, Development & SEO. It’s online, remotely deliverable services.

Since I have never done this kind of work, I am seeking advice regarding the legal and technical side of things. Should I be hired as an employee for liaising with their prospective customers and sending them money when a payment has been made?

As of now I'm being offered commissions for each client/project. Is it mandatory that they register their business here in the UK, and would it better if I was self-employed doing this type of work? As it's just commission presumably, the work will not be very taxing?

Expert’s Answer: All interesting questions. It is not clear what services you are planning to provide aside from acting as a representative. Nor do you say where your client is based. It does appear that the business you describe is what we would term ‘digital services.’

The company must VAT-register

The first thing to note is that your clients should register for VAT in the UK, where digital services are concerned. In the case of digital services, the VAT authorities' presumption is that the VAT applicable is where your client is located and, in this case, the clients are in the UK.

The normal VAT threshold of £85,000 does not apply to digital services. One consequence of Brexit is to remove the €10,000 (£8,818) de-minimis threshold, and it means that even small amounts of consumer sales into the UK are taxable.

Wonder away about HMRC, but keep compliant

You may wonder how HMRC will police this (but they likely will). But if you are the business’s UK representative, I recommend you act cautiously and do all you can to make sure your client does things compliantly too.

As to your work as their representative, no doubt your commission will be linked directly to turnover in the UK, which could trigger VAT assessments from HMRC. But based on the circumstances you outline, there are no other necessary registrations they need to make.

How to structure yourself as a representative

Now let’s turn to how best to structure you. The choice is between employing you and your being self-employed. As your client does not intend to open a company in the UK, employing you will not be sensible. HMRC does not permit foreign employers, and you would need to have a company or a branch registered with them as an employer. The alternative is to have an umbrella company or PEO outfit employ you. Such a structure gives you employment rights. But it is not identical to being employed by your end-user employer, so do check the particulars before you commit.

If you are working commission-only, then self-employment may suit you and your client better. In that case, you would have to submit a self-assessment return of income to HMRC, and pay your tax and social security, which will be payable in two instalments per annum.

IR35? For once, forget it

Finally, as they are being widely spoken about ahead of their introduction in the UK on April 6th 2021, it might reassure you to note that the new off-payroll rules will not apply, as there will be no intermediary. As a result, there is no reason why your client should not pay you without deduction of tax when you present them with your invoice. Good luck with the new job of being an overseas company’s UK representative!

The expert was Nik Papageorgiou, EU country manager for overseas contracting advisory Access Financial.