Contractors' Questions: Will my limited company save us tax in France?

Contractor’s Question: I am a director of a limited company in the UK and need some help about contracting overseas.

My husband has been shortlisted for a contract to work in France. If he’s selected, our intention is to move to France for the 18-month contract, but I will not be working there.

With these details in mind, what tax implications would we face and can we minimise these tax liabilities using my ‘Ltd’? Any guidance would be appreciated, as we’re not sure if the move is going to be worth it, financially.

Expert’s Answer: Congratulations on the pending French assignment! France can indeed look daunting and costly from an outsider’s perspective, but there are ways of working compliantly that are still worth exploring.

The ‘golden rule’ when working overseas is that tax must be paid where the income is earned. In the case of your husband’s French contract, therefore, he will have a French tax liability for all earnings derived from work carried out in France.

Working in France using a UK limited company is not compliant, unless the company is properly registered in France. In fact, if your husband is looking at invoicing and getting paid through the limited company (without registering the company locally), tax would be paid only in the UK and not in France, and his French tax liability would not be satisfied.

To work in France compliantly, the most cost-effective method is to use the services of a payroll company that can offer an employment structure in France. With this type of structure tax and social security would be managed on your husband’s behalf and paid to the relevant authorities, and retention rates should be around 65-70%.

It is also worth touching briefly on the question of tax residency in the UK. If you and your husband maintain a primary residence in the UK, or if you do not leave the UK for more than a full UK tax year, the French earnings may also be subject to UK income tax. In such cases, the UK tax will be reduced by the amount of French tax already paid. However, if the UK tax works out higher on this same income, the difference will need to be paid in the UK.

Working in France presents many opportunities, and can be very lucrative. As with any overseas opportunity, it is vital to seek expert advice before accepting the role, and to understand exactly what costs to expect both at home and abroad.

The expert was Helene Truffa of Capital Consulting, an adviser to UK contractors working overseas.

Editor’s Note: Further Reading –

Contractors’ Questions:  Can I use my limited company overseas?

Contractors’ Questions: Can my ‘Ltd’ supply the client at home and abroad?

Contractors’ Questions: Can I claim travel expenses from home in France to the UK?