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OnwardandUpward
23rd September 2004, 12:54
I have been out of the contracting game for 3 years.
I am non-UK resident and have an EU LTD company(dormant)

If i was to consider a contract in the UK for 3-6 months and commute home each week, where I would still be considered resident, what are the implications for?

1. Would you suggest using a UK umbrella
2. If using my own LTD do I need to charge VAT (on essentially exports)
3. I would be paying income tax in EU country due to double-taxation agreement. Am I outside of IR35 using Umbrella Vs my own LTd

I would appreciate any replies, I haven't contacted an accountant as I am at a very early stage in considering a return to contracting

expat
23rd September 2004, 13:54
I didn't post this! but it's like my case. I have 1 ir 1-1/2 of the answers:

2. If you bill from one EU country to another, you do not normally collect VAT for services. You have to mention VAT 0 on your invoices, and probably have to cite the legal text that justifies this.
However if you do this for long, with no other business in the other country (where your company is based) then you risk it being assessed as really a British company (and then of course you would have to collect VAT).

3. What do you really mean to ask, when you mention IR35? If you go through an umbrella company, IR35 is irrelevant. If you use your own company, then you are or are not caught depending on your relation with the client. Being non-resident has nothing to do with it, either way.

Incidentally, however you structure it you will be liable for UK income tax on the income earned in the UK. If you are non-resident, then you will only be liable for this (and not for worldwide earnings). What happens in your country of residence depends on that country, but (in general) you will be liable there for income tax on all earnings worldwide, with a credit for tax paid in other countries with which your country has a double-taxation avoidance agreement.

OnwardandUpward
23rd September 2004, 14:11
Thanks for the response maybe my terminology is wrong

I had a LTD company in Europe and no Tax status in UK, as I have never worked there

My previous contracts were based in Germany
I worked in EU, billed a UK agency and never paid VAT as advised it was exports

I paid income tax in my resident country but none in Germany, as I was classed really as an employee posted abroad.
I got some income tax exemptions as I was out of the country for more than a certain number of days.

If my European business posts somebody to the UK on assignment for 3 months surely they are not income-taxed in the UK, nor can a European company pay corp tax in UK either.

I understand that there is very little tax harmonisation across EU at present and that every country differs
Regards

tim123
24th September 2004, 09:06
"If my European business posts somebody to the UK on assignment for 3 months surely they are not income-taxed in the UK"

Nope, they are liable to UK tax for the UK earned income for the three months. There is an exception for duties performed in the UK which are 'incidental' to the normal job (so you don't get taxed in the UK just for attending meetings or a training course) but a fixed term of three months is never going to pass this test. Note, that the country of physical presence has first bite so you don't get to avoid the UK tax aggro just because you home country tax bill would be higher.

No idea what the Corp tax considerations are.

tim

expat
24th September 2004, 09:13
If my European business posts somebody to the UK on assignment for 3 months surely they are not income-taxed in the UK, nor can a European company pay corp tax in UK either.IANAL and IANAA but as I understand it you are quite wrong on both counts (especially the first).

If a person works in the UK then that person is liable to pay UK tax on the income earned there, if they stay in the UK less than 183 days in the tax year (and less than an average of 91 days in a 5-year period). If they stay more than that, they are taxable in the UK on all income from anywhere in the world.

This may be counterbalanced by double-taxation relief agreements between countries, but will not alter the liability in the UK for tax on income in the UK. And there is a provision for not paying tax for periods of less that 60 days (see www.inlandrevenue.gov.uk/bulletins/tb68.htm#c (http://www.inlandrevenue.gov.uk/bulletins/tb68.htm#c) )

And if your European company has its centre of interests (i.e. you) in the UK, it may be assessed as being a UK company.

Bradley
24th September 2004, 13:50
2. If using my own LTD do I need to charge VAT (on essentially exports)Yes. Under the VAT rules IT consultants need to charge VAT where the work is physically carried out.

expat
24th September 2004, 16:51
Under the VAT rules IT consultants need to charge VAT where the work is physically carried out.Rubbish! If a company in one country invoices a client in another for services, it should not collect VAT.

Bradley
24th September 2004, 17:27
16.5 The VAT Act 1994 – Schedule 5

Services supplied where received.

1. Transfers and assignments of copyright, patents, licences, trademarks and similar rights.
2. Advertising services.
3. Services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services; data processing and provision of information (but excluding from this head any services relating to
land).
4...

Bradley
24th September 2004, 17:29
Before you say it, English VAT rules are based on European VAT rules so what Schedule 5 says holds good for the whole of the EU

expat
27th September 2004, 11:29
But that's exactly the point, the services are provided in one country by a supplier based in another. Therefore it is an intracommunity billing and VAT is due from the customer and not from the supplier.

E.g. France, Code Générale des Impôts Art 259:


2.2.4. Les prestations de services à caractère intellectuel

Les prestations de services, telles que cessions et concessions de droits d'auteurs, de brevets, de droits de licences, prestations des conseillers, ingénieurs, bureaux d'études, expertise comptable, location de biens meubles corporels autres que moyens de transport, fournies par un prestataire établi hors de France sont réputées se situer en France lorsque le preneur est assujetti à la TVA en France et y a le siège de son activité économique.

Dans cette hypothèse, la TVA est due par le preneur.

Bradley
27th September 2004, 14:08
The Babel Fish translation of what you posted says

2.2.4. Provisions of services in intellectual matter The provisions of services, such as transfers and concessions of rights of authors, patents, excise taxes, services of the advisers, engineers, offices d'études, accountancy, hiring of movable property body others that means of transport, provided by a person receiving benefits established out of France are famous to be in France when the taker is fixed with the VAT in France and y has the seat of its economic activity. On this assumption, the VAT is due by the taker.
That's fine except we're talking about a foreign resident individual/corporation coming to work in the UK!

The French have probably just done their usual and ignored the EC rules. In any event if it came to an argument between the French and UK regimes, the UK regime would prevail.

expat
27th September 2004, 16:18
You're struggling, Bradley.


The Babel Fish translation of what you posted saysYou don't need a translation of what I quoted by way of illustration. What I myself wrote is simple:

But that's exactly the point, the services are provided in one country by a supplier based in another. Therefore it is an intracommunity billing and VAT is due from the customer and not from the supplier.


That's fine except we're talking about a foreign resident individual/corporation coming to work in the UK!As you said yourself,

Before you say it, English VAT rules are based on European VAT rules so what Schedule 5 says holds good for the whole of the EU

The French have probably just done their usual and ignored the EC rules. In any event if it came to an argument between the French and UK regimes, the UK regime would prevail.Cheap shots. They have done the same as everyobody else.


16.5 The VAT Act 1994 – Schedule 5

Services supplied where received.Quite so: supplied in the UK by a French supplier (in our example). The place of supply determines which country's VAT should be paid, not who should pay it. That is determined by whether or not the supplier is based in the country whose VAT is to be paid. Simple, logical, and consistent across the EU in anybody's language. Ask the tax authorities themselves; I did, in both countries.

antell
27th September 2004, 19:49
. What do you really mean to ask, when you mention IR35? If you go through an umbrella company, IR35 is irrelevant. If you use your own company, then you are or are not caught depending on your relation with the client. Being non-resident has nothing to do with it, either way.

Without going into the details of the case in point (about which the questionner should seek legal advice) it is not quite true to say that IR35 all depends on the relationship with the client and that "being non-resident has nothing to do with it".
Even if the relationship with the client would otherwise cause IR35 to apply, the resident and/or "temporary posting" status of the employee can prevent IR35 applying in certain circumstances. The rules are different for tax and NIC. For tax, see, for example s56 of ITEPA 2003 for tax and EEC regulation 1408/71 for NIC.

John Antell

barrister

www.john.antell.name (http://www.john.antell.name)

expat
28th September 2004, 07:45
I had forgotten about temporary postings. But isn't that quite unlikely in our business? Doesn't it require that one be posted by one's company in a country other than the one where the services are supplied? It might be hard to convince the Revenue that you had posted yourself from France on secondment as part of an ongoing business; if they looked at your UK contract in isolation.

antell
28th September 2004, 09:39
It might be hard to convince the Revenue that you had posted yourself from France on secondment as part of an ongoing business; if they looked at your UK contract in isolation.

This is where it becomes quite complex. For NIC IR35 to apply you have to be:

1. "in reality" within the UK NIC system, and

2. as regards the "hypothetical contract" with the client, an employed earner within the UK NIC system

I think what you are saying is that it may be difficult to show secondment as regards 2 because the client (=hypothetical employer) has not seconded the worker. This may well be so. However if in reality the worker is seconded he may avoid the UK NIC system altogether at stage 1 and therefore stage 2 becomes irrelevant.

Obviously it depends very much on the circumstances of the individual case

John Antell

barrister

www.john.antell.name (http://www.john.antell.name)

Bradley
28th September 2004, 11:07
expat - what happens if the UK customer is an individual or a non-VAT registered body such as a local government body?

expat
28th September 2004, 11:25
Interesting question. Intracommunity VAT (i.e. the case where you bill a customer in another EU country without VAT) requires the invoice to state the intracommunity VAT numbers of both the supplier and the customer. So if the customer doesn't have one, you can't do it that way (and so I quess the supplier has to charge it after all; presumably the VAT of the country of supply, which could be irritating to implement).