Contracting overseas is still limited, but three destinations have an edge as covid restrictions ease

With international air travel largely resuming and borders reopening because ‘we’ve just got rid of covid,’ in the words of Tory peer and retail magnate Lord Stuart Rose, the prospect of contracting overseas has remerged, writes chartered accountant Kevin Austin, managing director of overseas contracting advisory Access Financial.

The backdrop (doesn’t bear repeating)

Less positively, under the terms of the UK-EU’s now in-force Brexit deal, it has not been possible for Britons (specifically UK passport holders) to work freely in the EU, unless they registered for residency abroad during the deal’s so-called ‘transition period.’

Unless you got in then, the previous freedom Britons had to work in up to 28 countries, as an independent worker, have suffered a severe and irreversible blow. And all this hit just at a time when many UK contractors probably wouldn’t have minded getting away – to escape the clutches of HMRC’s off-payroll working rules for the private sector.  

Umbrellas, flexibility, and forgetting

Currently, a few UK contractors are coming forward with the tantalising idea of working in a more genial clime, with a higher quality of life, often because the idea or experience of being employed in the UK via an umbrella company is, well, almost the opposite.

Well, if you have flexibility in your work and can work remotely, let us suggest to you Cyprus, the Netherlands and maybe, if you like the idea of keeping up the adversarial relationship with tax officials you’ve likely nurtured in the UK, Spain.

In Cyprus, our advisory can provide Employer of Record Services for those Brits who want to relocate to Cyprus.

If you plan to leave the UK for more than an entire tax year, you can fortunately forget about UK tax and NICs -- and your client can forget about the April 2021 off-payroll rules, whereby they can pay you as an independent contractor. 

Top 10 benefits of Cyprus relocation

The many benefits of moving to the third-largest island in the Mediterranean:  

  1. Personal income tax exemption of 50% for new Cyprus tax resident employees with salaried income of at least €55,000 (£46,300) per annum; 
  2. Fast-track work permits; 
  3. Spouses of third-country nationals who have obtained a residence and work permit in the Republic, and who receive a minimum gross monthly salary of €2,500 (not applicable for support staff), will have immediate and free access to employment; 
  4. Cyprus has a large British ex-pat community and English is widely-spoken.; 
  5. An array of high-quality English and other private schools; 
  6. Competitively priced and available rental accommodation; 
  7. Reliable, frequent flights to and from the UK, Europe, the Middle East; 
  8. No IR35, no Off-Payroll Rules; 
  9. The possibility to obtain an EU passport after five years; 
  10. Generous expat tax concessions and moderate tax and social security.

Where else? As we’ve explained before, there are in 2022 only a few examples of countries where Brits can freely go to work, or live, post-Brexit deal.

Netherlands not to be ruled out if you’re highly-skilled

One nation for contractors to consider, especially as it has quite a long history of being ‘freelance-friendly’ is the Netherlands. Despite the country’s currently runaway inflation – and inflation was the whole point of Lord Rose’s comments (i.e. covid has been replaced by the also widely-affecting phenomenon of inflation), third-country nationals, such as Britons, can apply to Dutch authorities for a Knowledge Migrant Work permit. The KMW is a fast-track employed work permit for highly skilled and well-paid foreigners. Could that be you?

If not the Netherlands, Brits in the age of Brexit can live and work throughout the Common Travel Area (CTA), comprising:

  • the UK,
  • the Republic of Ireland,
  • the Isle of Man, and
  • the Channel Islands.

The pain in Spain…

Earlier in this piece, I mentioned Spain. But in common with most tax jurisdictions, Spain is stepping up its vigilance towards taxpayers who do not meet their liabilities.So rather than have the edge as Netherlands and Cyprus do when it comes to you picking a destination for working abroad, Spain merely has an edge. And it's quite a sharp edge at that!

In particular, the Common Reporting Standard and information-sharing between banks and governments throughout the OECD means there are now fewer and fewer hiding places for contractors avoiding of their tax obligations. In the UK, the Criminal Finances Act 2017 is being used to rein in those who willingly aid and abet tax evasion in the UK and abroad, which is potentially a concern not just for contractors, but recruitment businesses too.

If you’re a contractor, your recruiter also needs to note that they may become exposed to the risk of creating a ‘permanent establishment’ abroad if they conduct business and form a fixed place of business by the number of contractors they may have there in that country. Spain for example. Having such a permanent establishment may expose the recruitment biz to local company income tax (corporation tax) on profits attributable to their activities. And as contractors know, if their agency’s costs go up, agents like to try to ease any potential squeeze by passing that cost on!

Finally, the umbrella of your dreams

If it’s the Med you’re after, and given it has some 300+days of sunshine, it’s hard to see Cyprus as not a current go-to for dispirited UK contractors. With the 10 other reasons outlined above to consider the country, what’s not to like? In Cyprus, you’ll find the only umbrella to be under is the one on the beach!

Wednesday 4th May 2022
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Written by Kevin Austin

Kevin is a Fellow of the Institute of Chartered Accountants in England and Wales, a Fellow of the Association of Chartered Certified Accountants, a Fellow of the Association of International Accountants and a Fellow of the Chartered Management Institute.

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