Contracting from France to UK company Contracting from France to UK company - Page 2
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  1. #11

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    Quote Originally Posted by mike 0 View Post
    I am an EU citizen, I guess this comment was assuming I was exclusively a British national?
    Others sometimes refer to these threads and try to match them to their own situation.

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    Quote Originally Posted by ContractorPL View Post
    Hi All,

    Let me share my thoughts & experience here as I have similar concerns (though, in my case, it's about working from Poland via a UK Ltd company but I think there will be similarities as both Poland and France are EU countries).

    I think this post as well as other similar posts on this forum do not mention an important factor - UK clients are extremly unwilling to cooperate with overseas limited companies/sole traders. I have a contract with one of the largest UK insurance companies and it is operated by a large UK recruitment/payroll agencies. When I asked if I can carry out my contract via a polish company, they declined. When I asked why, they did not provide any explanation. Ironically, both my client and the payroll agency have offices in Poland, and actually they carry out UK payroll at one of the EU East European countries shared service centre. My friends who contract for other big insurance companies have the same experience. Large UK recruitment agencies, with offices worldwide and compliance departments decline it. In the contract job adverts, when they say 'remote work', they also add 'UK work permit required'. At first I was furious at it, as I thought some narrow-minded wages clerk refuses to step out of his comfort zone or can't handle an IBAN bank account format...but I did some reading and I think the reason they decline is that this is an extra risk for them...they should, for example, check, if there's an IR35-equivalent law in my country etc.

    ...which leaves people like me with virtually 2 choices. Either run a UK LTD and withdraw money from it (via director's wages and dividends), or to become a sole trader/set up a limited a company in Poland that would bill the UK limited company. I don't have any experience with the HMRC or any fiscal body that can control me, but it seems to me that HMRC would definately want to look into the company that has expenses equal 99% of its revenue. Nature of business in the companies house for such company should say 'moving money across companies', not 'IT development services'.
    Do you really think that would be accepted by HMRC? Wouldnt' they say, for example, that since 100% of work is done remotely on the computer servers which are physically in the UK, that is the UK work? Or would the fact that I plan (when covid eases) fly to my client for a few days in a month matter? Or the fact, that corporate tax in Poland is 9%, two times smaller than UK's - won't they think I'm tax evading? Simply put, I'm very much afraid of doing this.

    I understand the main point of concern here is that fiscal authorities in my resident country will question the residency of my company. The residence of the UK Limited company is defined by 3 factors (incorporation place, place where records are kept/bookkeeping is done, place from where the company is controlled). First two are easy to meet. As far as control is concerned, this is mostly about the company board meetings. I plan to hold a few board meetings of my company in a year, and they will happen while I'm on the Isles. I probably will have these documents certified, I also plan to collect evidence of each of my UK visit. I might also ask HMRC for the certificate of residence of my company. Do you think they will give it to me?

    From what I have googled, it will be more difficult to prove my company is not a UK resident if there aren't any indicators that I have a permanent establishment in Poland. Therefore I must not:
    - trade in Poland/for polish clients
    - employ people here
    - buy any office equipment
    - use polish bank accounts (UK Ltd money is in the UK bank, I pay my director's wages/dividend to a UK personal bank account, then transfer money to Poland)

    My main question is, if worst come to the worst, and polish tax authorities make a judgment I run a polish company, what can happen? They will calculate the corporate tax (which is much lower here) and add some penalty interest. Can I then ask the HMRC to give me my corporate tax back? I might be better off actually
    Both Poland and the UK have signed the MLI tax convention, there's also double taxation agreement.

    Looking forward to seeing your comments and opinions.
    It is correct that you will probably have to invoice via a UK company. However it will not be taxable in the UK just because you work on a server in the UK. The right solution is set up a second company in Poland and invoice the UK Ltd. You are right that HMRC may audit your company and check that you work in Poland, however you will easily be able to give proof if you actually work there. You will have a Polish address, and they won't be able to "find you in the UK".

    The Polish authorities would also be as rigorous as HMRC checking if you worked in the UK, if you were to tax your earnings in the UK so however you organise this you will be audited by one or the other. The right way though is to tax the earnings in the country where the work is actually carried out.

    It would be advisable to have a UK accountant and a Polish accountant. This will ensure you get no aggro from either tax authority. Even if you legally shouldn't be paying tax it can still be annoying and time consuming answering enquiries.

    If you travel to and fro, keep records and evidence such as plane tickets and hotel bills and just ensure the the correct proportion of profit is booked in the UK. An accountant can advise you on this.
    Last edited by BlasterBates; 9th October 2020 at 15:29.
    I'm alright Jack

  3. #13

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    Quote Originally Posted by BlasterBates View Post
    It is correct that you will probably have to invoice via a UK company. However it will not be taxable in the UK just because you work on a server in the UK. The right solution is set up a second company in Poland and invoice the UK Ltd. You are right that HMRC may audit your company and check that you work in Poland, however you will easily be able to give proof if you actually work there. You will have a Polish address, and they won't be able to "find you in the UK".

    The Polish authorities would also be as rigorous as HMRC checking if you worked in the UK, if you were to tax your earnings in the UK so however you organise this you will be audited by one or the other. The right way though is to tax the earnings in the country where the work is actually carried out.

    It would be advisable to have a UK accountant and a Polish accountant. This will ensure you get no aggro from either tax authority. Even if you legally shouldn't be paying tax it can still be annoying and time consuming answering enquiries.

    If you travel to and fro, keep records and evidence such as plane tickets and hotel bills and just ensure the the correct proportion of profit is booked in the UK. An accountant can advise you on this.
    If he does it this way, billing the UK company from the Polish one for the services rendered (I’ve heard it’s better to bill about 65% in such cases), will he still need to demonstrate substance in the UK, carry out board meetings etc?

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    Quote Originally Posted by zerosum View Post
    If he does it this way, billing the UK company from the Polish one for the services rendered (I’ve heard it’s better to bill about 65% in such cases), will he still need to demonstrate substance in the UK, carry out board meetings etc?

    Thank you both for you answers. Why 65%?

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    Quote Originally Posted by zerosum View Post
    If he does it this way, billing the UK company from the Polish one for the services rendered (I’ve heard it’s better to bill about 65% in such cases), will he still need to demonstrate substance in the UK, carry out board meetings etc?
    No that makes no difference, he needs to show that he is in the UK actually working. A one day board meeting isn't enough. The proportion of profit booked to the UK should reflect the proportion of time spent there and shouldn't be based on tax efficiency.
    I'm alright Jack

  6. #16

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    Quote Originally Posted by ContractorPL View Post
    Hi All,

    Let me share my thoughts & experience here as I have similar concerns (though, in my case, it's about working from Poland via a UK Ltd company but I think there will be similarities as both Poland and France are EU countries).

    I think this post as well as other similar posts on this forum do not mention an important factor - UK clients are extremly unwilling to cooperate with overseas limited companies/sole traders. I have a contract with one of the largest UK insurance companies and it is operated by a large UK recruitment/payroll agencies. When I asked if I can carry out my contract via a polish company, they declined. When I asked why, they did not provide any explanation. Ironically, both my client and the payroll agency have offices in Poland, and actually they carry out UK payroll at one of the EU East European countries shared service centre. My friends who contract for other big insurance companies have the same experience. Large UK recruitment agencies, with offices worldwide and compliance departments decline it. In the contract job adverts, when they say 'remote work', they also add 'UK work permit required'. At first I was furious at it, as I thought some narrow-minded wages clerk refuses to step out of his comfort zone or can't handle an IBAN bank account format...but I did some reading and I think the reason they decline is that this is an extra risk for them...they should, for example, check, if there's an IR35-equivalent law in my country etc.

    ...which leaves people like me with virtually 2 choices. Either run a UK LTD and withdraw money from it (via director's wages and dividends), or to become a sole trader/set up a limited a company in Poland that would bill the UK limited company. I don't have any experience with the HMRC or any fiscal body that can control me, but it seems to me that HMRC would definately want to look into the company that has expenses equal 99% of its revenue. Nature of business in the companies house for such company should say 'moving money across companies', not 'IT development services'.
    Do you really think that would be accepted by HMRC? Wouldnt' they say, for example, that since 100% of work is done remotely on the computer servers which are physically in the UK, that is the UK work? Or would the fact that I plan (when covid eases) fly to my client for a few days in a month matter? Or the fact, that corporate tax in Poland is 9%, two times smaller than UK's - won't they think I'm tax evading? Simply put, I'm very much afraid of doing this.

    I understand the main point of concern here is that fiscal authorities in my resident country will question the residency of my company. The residence of the UK Limited company is defined by 3 factors (incorporation place, place where records are kept/bookkeeping is done, place from where the company is controlled). First two are easy to meet. As far as control is concerned, this is mostly about the company board meetings. I plan to hold a few board meetings of my company in a year, and they will happen while I'm on the Isles. I probably will have these documents certified, I also plan to collect evidence of each of my UK visit. I might also ask HMRC for the certificate of residence of my company. Do you think they will give it to me?

    From what I have googled, it will be more difficult to prove my company is not a UK resident if there aren't any indicators that I have a permanent establishment in Poland. Therefore I must not:
    - trade in Poland/for polish clients
    - employ people here
    - buy any office equipment
    - use polish bank accounts (UK Ltd money is in the UK bank, I pay my director's wages/dividend to a UK personal bank account, then transfer money to Poland)

    My main question is, if worst come to the worst, and polish tax authorities make a judgment I run a polish company, what can happen? They will calculate the corporate tax (which is much lower here) and add some penalty interest. Can I then ask the HMRC to give me my corporate tax back? I might be better off actually
    Both Poland and the UK have signed the MLI tax convention, there's also double taxation agreement.

    Looking forward to seeing your comments and opinions.
    I am in a very similar position to you. I am not having much luck getting my CV past Polish HR departments right now and saw on UK job sites for the first time in my field (Finance) a significant number of remote working possibilities which didn't exist before. I still have my own Ltd Company from my UK contracting days from 2014-2018 but so many jobs are now labelled "inside IR35" that I don't know if I'll be allowed to use it, even though I cannot actually be inside IR35 if I'm non-resident for UK tax purposes. I'm focusing on finding someone who wants to hire me as a contractor for now and will have to wing it with some kind of solution once I get a positive intent to hire me.

    If you aren't actually doing any work inside the UK I wouldn't try to withdraw anything as dividends. I'd shift all profits into Poland by invoicing the UK Ltd company from your Polish self-employed business and pay all taxes in Poland. There is no UK tax liability if there is no income generated in the UK. The UK company just serves as a middle man but doesn't take a cut for its own profits like the employment agency does. And from what I understand, Poland doesn't legally recognise in Poland a one-man company. And all the income has been taxed in Poland as self-employment anyway. In terms of the UK side, you can have a virtual service address in the UK and the director can be non-resident. I don't think there is anything to prove about the UK Ltd company. HMRC might ask questions but they should be answerable particularly if your invoices are clear. You might want to check this with a UK accountant and a Polish tax advisor though as this is just my current understanding.

  7. #17

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    Quote Originally Posted by ContractorPL View Post
    Thank you both for you answers. Why 65%?
    Just an illustration. Have a look into the arm's length principle and transfer pricing, and base your research on your intended setup and people's experience with the same.

  8. #18

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    Quote Originally Posted by ContractorPL View Post
    Thank you both for you answers. Why 65%?
    65% was plucked from the air. The point is, you have to address the transfer pricing issue.

    For example, let's say in the UK what you do would fetch £600 a day. In Poland, you'd be lucky to secure 250€ a day. You have to take account of this in your pricing; unless there's a very good reason, it should be the same as if the companies were unrelated. Transfer pricing: Keeping it at arm’s length - OECD Observer

    It's probably safer to bill the lowest figure you can in Poland. That means you can't lower the CT in the UK by much, but it may enable you to ensure compliance without too much paperwork.

  9. #19

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    Quote Originally Posted by zerosum View Post
    65% was plucked from the air. The point is, you have to address the transfer pricing issue.

    For example, let's say in the UK what you do would fetch £600 a day. In Poland, you'd be lucky to secure 250€ a day. You have to take account of this in your pricing; unless there's a very good reason, it should be the same as if the companies were unrelated. Transfer pricing: Keeping it at arm’s length - OECD Observer

    It's probably safer to bill the lowest figure you can in Poland. That means you can't lower the CT in the UK by much, but it may enable you to ensure compliance without too much paperwork.
    If he is doing all the work in Poland then the UK Ltd is only acting as an intermediary. Taxing almost 35% earnings in the UK might not be accepted in Poland.
    Last edited by BlasterBates; 1st December 2020 at 09:31.
    I'm alright Jack

  10. #20

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    Quote Originally Posted by BlasterBates View Post
    If he is doing all the work in Poland then the UK Ltd is only acting as an intermediary. Taxing almost 35% earnings in the UK might not be accepted in Poland.
    It's not an intermediary. Without the UK company the work would not have been obtained at UK market rates. There are very strict internationally accepted rules around this. You cannot ignore transfer pricing. And if you're hoping to get away with it without them noticing, the fines are heavy.

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