Tax residency and becoming a contractor Tax residency and becoming a contractor
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  1. #1

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    Default Tax residency and becoming a contractor

    Hello. My situation is I am employed by a law firm in the UK. Lived in the UK all my life, am a British citizen. But then got the opportunity to move to Canada in Aug 2018 and did so. My firm continued to employ me and allowed me to work out of Canada.

    I have no ties to the UK (no spouse, kids, house etc). I spend less than 90 days in the UK in a tax year. I work from home, from Canada.

    I would like to declare myself as non-resident to HMRC. I would like to say that the date I became non-resident is the date I got my permanent residence granted out in Canada, being June 2019.

    I would like my firm to terminate my employment and instead, I set up a limited company in Canada and they hire me as a foreign contractor, through that Canadian company. As I would not be a UK tax resident - my understand is IR35 would not apply. My firm are amenable.

    Can anyone please advise if I have understood this all correctly (tried to pick it all up from googling) - and that in the circumstances I have described above, the end result would be that I would only have to pay taxes in Canada?

    Please let me know if there are any other steps or considerations that I might be missing here.

    Thanks in advance.

  2. #2

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    NotAllThere's Avatar
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    I'm Swiss resident, very few UK ties. I contracted to a UK company, remotely, via my Swiss company for years. There was no tax due in the UK at all. No VAT was payable by the client. When I first left the UK it was for a permie Swiss job. I filled in a P85 and settled my outstanding UK tax, and that was it. No further contact with HMRC.

    Canada may have different rules, but people resident in Switzerland (and it's possible you've been resident in Canada since August 2018 - you should get that sorted out), who work for UK employers, are paid gross - no tax deduction, no employee NI + the employer NI, which isn't due in the UK. The worker registers under the ANOBAG scheme (Swiss), and pay the eeNIC and erNIC Swiss equivalents and Swiss tax.
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  3. #3

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    Give HMRC a ring and tell them you're living and working over seas and that your UK Ltd Co is no longer trading. They should issue you with a UK NT tax code.

  4. #4

    More fingers than teeth

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    Really you should have been paying tax in Canada since you moved out there. You are taxable in the location where you do the work. If the Canadian tax authorities were to enquire about your UK income, which should be declared, they may well enquire about whether you regularly travelled to the UK to work.
    I'm alright Jack

  5. #5

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    Quote Originally Posted by Si666 View Post
    Give HMRC a ring and tell them you're living and working over seas and that your UK Ltd Co is no longer trading. They should issue you with a UK NT tax code.
    Thanks for the advice - but not too sure what you mean - I 've never had a UK Ltd company in place? I've always been an employee to a UK employer.

  6. #6

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    Quote Originally Posted by BlasterBates View Post
    Really you should have been paying tax in Canada since you moved out there. You are taxable in the location where you do the work. If the Canadian tax authorities were to enquire about your UK income, which should be declared, they may well enquire about whether you regularly travelled to the UK to work.
    I understand what you are saying.

    However, let's assuming for the moment that I became tax resident in Canada in June 2019, can you please advise whether the contractor structure I described in my original post is accurate, as to tax obligations going forward?

  7. #7

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    Quote Originally Posted by keloid View Post
    Thanks for the advice - but not too sure what you mean - I 've never had a UK Ltd company in place? I've always been an employee to a UK employer.
    As mentioned above, you are eligible to pay tax in the country where you reside and work. Should still inform HMRC, as your NT tax code is applicable whether or not you have an Ltd Co here. NT just means "No Tax", so they wont be chasing you for money you don't owe.

  8. #8

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    Eirikur's Avatar
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    Seek tax advise from a professional with knowledge of the tax systems of the jurisdiction you are moving to, not some random people on the internet.

  9. #9

    More fingers than teeth

    BlasterBates's Avatar
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    Quote Originally Posted by keloid View Post
    I understand what you are saying.

    However, let's assuming for the moment that I became tax resident in Canada in June 2019, can you please advise whether the contractor structure I described in my original post is accurate, as to tax obligations going forward?
    You're already tax resident. Yes it will work, going forward, but it isn't the UK authorities who are a problem here. The Canadian authorities will be expecting a tax return from you for 2018.
    I'm alright Jack

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