Contractors' Questions: Can I use my UK 'Ltd' overseas?
Contractor's Question: I am considering accepting an offer of a short contract overseas. Can I simply use my existing, UK-registered limited company?
Expert's Answer: Recent cases have proven that it is essential to seek professional advice before accepting overseas contracts as there could be hidden costs associated with such a move. Her Majesty's Revenue and Customs is keen to deal with the issue of tax avoidance through offshore vehicles, and while overseas working is an entirely different issue, poor advice can all too easily cause contractors to fall foul of UK tax requirements.
For instance, there is a concession which allows those working outside the UK on a full time contract, which spans a complete tax year, to become non-UK resident for the period spent working overseas. However, the rules governing compliance with this concession are complex and intertwined with the tax requirements of the country in which the contractor is working
In your circumstances, the primary tax issue to consider is the tax residency of both you and your limited company. If you are working overseas via your own UK limited company, you and your company may end up being liable for tax in the UK and the country you are working in, thus paying taxes in both countries.
While you will usually be able to claim 'double tax' relief it is however important that you seek advice to ensure you remain compliant and you understand how much tax you will be paying as this may be more than you might initially expect.
As a general rule, we would not recommend working on an overseas contract via your UK limited company for more than 6 months, as the risk of becoming 'dual resident' for tax purposes is increased.
Alternatively, you could pursue and bill your short overseas contract through an umbrella company. However UK based Umbrella services are usually only designed for assignments based in the UK, though occasional work outside the UK under a UK contract for short periods of time is generally acceptable. That said, if the assignment is under a non-UK contract with duties performed outside the UK, the associated tax risks do not make working via a UK umbrella company attractive.
The expert was Martin Hesketh, managing director of Brookson, an accountancy firm for UK contractors working overseas.