Consultancy from UK for an Indian client and Taxation?

[Contractor786]

I am a British citizen, currently employed full-time at a UK based plc. I have an opportunity to quit my F/T job and start work as a consultant for a client based in India who doesn't have an office in the UK. My consultancy work will involve developing sales opportunities for them in Europe.

For payment, my client has mentioned that they will pay directly in my personal bank account after deducting 20% TDS (tax deducted at source) and then I will be responsible to pay the remainder tax to HMRC. India has a double tax treaty with the UK!

I was unclear about how the above will work so I consulted a friend who has advised me to register a limited company (take director's salary + dividends) and invoice the client in India on a monthly basis. My client has said that they are ok with this but they will still deduct the TDS @ 20% on a monthly basis.

I have the following questions:

a) Corporation tax is 19% on the profits. If my client deduct 20% TDS, will I be able to claim the tax back from HMRC as the actual corporation tax (after my pension payment, salary and expenses) will definitely be less than 20%? How will this work?

b) The annual contract could be above £85k. Do I need to be VAT registered and charge my client for VAT even though they are outside of EU?

Information on gov.uk website is not so clear so I would really appreciate some assistance with this. Thanks

[cojak]

I am a British citizen, currently employed full-time at a UK based plc. I have an opportunity to quit my F/T job and start work as a consultant for a client based in India who doesn't have an office in the UK. My consultancy work will involve developing sales opportunities for them in Europe.

For payment, my client has mentioned that they will pay directly in my personal bank account after deducting 20% TDS (tax deducted at source) and then I will be responsible to pay the remainder tax to HMRC. India has a double tax treaty with the UK!

I was unclear about how the above will work so I consulted a friend who has advised me to register a limited company (take director's salary + dividends) and invoice the client in India on a monthly basis. My client has said that they are ok with this but they will still deduct the TDS @ 20% on a monthly basis.

I have the following questions:

a) Corporation tax is 19% on the profits. If my client deduct 20% TDS, will I be able to claim the tax back from HMRC as the actual corporation tax (after my pension payment, salary and expenses) will definitely be less than 20%? How will this work?

b) The annual contract could be above £85k. Do I need to be VAT registered and charge my client for VAT even though they are outside of EU?

Information on gov.uk website is not so clear so I would really appreciate some assistance with this. Thanks

The first thing is don’t trust this client. In the UK there is no such thing as this TDS with you paying the rest of the tax to HMRC. You are working in the UK and Europe - you either work inside IR35 and pay full tax, or you work outside IR35 and pay the tax yourself. The client isn’t looking out for you, it sounds like they are looking out for themselves and gouging 20% out of your rate.

And who pays for your travel and accommodation? You or the client? You may find that you do no more than break even after costs (or worse).

Not only that, you have to consider possible tax implications working in Europe for that it will be a good idea to speak to Sue at IPAYE.

[Old Greg]

Before you worry about tax... are they paying in advance? If not, what court will you sue them in for non payment and how will you enforce judgement?

[Lance]

This is a wind up right?

Quit a job, to work on a dubious remuneration, to be a travelling salesman when nobody can travel, around Europe which is closed, selling to companies who aren’t buying?

If this company is serious they’d open a small UK branch office. And if they did that they’d get a handful of visas to use. Why aren’t they doing this? Cos it’s not real.

[BlasterBates]

The tax deducted at source is the tax they are obliged to pay in India I suspect. This is nothing to do with you. You should simply quote them a net rate which will be taxed in full in the UK. You won't be able to offset it. The TDS is something you should simply ignore. It does appear that they're not going to the trouble of sorting out the tax in India. I could imagine that it would be complicated in India from stories you hear about bureacrcacy so maybe they've gone the simple route and are treating you as an Indian supplier.

[sojan]

I am a British citizen, currently employed full-time at a UK based plc. I have an opportunity to quit my F/T job and start work as a consultant for a client based in India who doesn't have an office in the UK. My consultancy work will involve developing sales opportunities for them in Europe.

For payment, my client has mentioned that they will pay directly in my personal bank account after deducting 20% TDS (tax deducted at source) and then I will be responsible to pay the remainder tax to HMRC. India has a double tax treaty with the UK!

...

In this current climate, I would say this is a risky proposition
- I don't think you will be able to travel freely with Covid floating around. So will they pay you without travel?
- I'm not sure if it is good for them to pay to UK personal account and HMRC not detecting it in medium term.
- If you have Indian PAN (like NI), then may be you could start the company in India and ask them to pay directly and you pay tax? rather than them taking TDS.

All in all, I feel it is slightly complex arrangement and not worth the try