Contractor’s Question: If I wanted to keep living in Europe but make use of my still-active UK limited company to execute a UK contract, would that be legal?
My plan would be to invoice the UK-based client as normal, but I would take a few trips to the UK over the course of the role. Does this sound lawful, compliant, and tax-efficient?
Expert’s Answer: Working remotely from Europe as a UK limited company on a UK contract isn't as simple as a ‘Yes-No’ answer.
While it may be legally permitted, running a UK-registered business from abroad in the manner proposed comes with significant risks and complexity.
Working for a UK firm from Europe: a ‘Grey Area’
The consensus from the provided answers on the ContractorUK Forum (where you first posted your query) makes clear that contracting from the Continent via a UK company is often a "grey area." Translated, the forum users’ answers mean that contracting from Europe for an employer in the UK requires careful consideration of tax, legal, and contractual issues.
And I wholeheartedly agree!
Seven key points when contracting from Europe for a UK company
In fact, I’d say there are at least seven key points to consider with remotely contracting from Europe for a UK company, starting with:
1. Tax Residency
To achieve compliance with your remote contracting set-up, you will need to be aware of personal tax residency and the UK Statutory Residence Test (SRT).
The 183-Day Rule and UK ‘Ties’
The UK Statutory Residence Test (SRT) determines if you are a UK tax resident.
Under the DRT, a key factor is spending 183 or more days in the UK in a tax year.
Being in the UK for this significant amount of time would automatically make you a resident liable for UK income tax (from HMRC) on your worldwide earnings.
Even if you spend less than 183 days in the UK, you can still be a tax resident if you have enough "ties" to the country.
What do UK ‘Ties’ Include?
These UK ties include the following in-country:
- a home;
- a family, and;
- working full-time for a significant period.
In addition, frequent visits to the UK would go towards establishing these ties and could contribute to triggering UK tax residency.
2. Split-Year Treatment
The UK offers "split-year treatment" if you move into or out of the country partway through a tax year, which means you would be taxed as a UK resident only for the portion of the year you were in the UK and as a non-resident for the time you were overseas.
However, the rules are complex and depend on your specific circumstances.
3. Permanent Establishments and Double Taxation
A significant risk is the creation of a "Permanent Establishment" (PE) in your country of residence in Europe, and this could happen if you—as a UK limited company director—conduct essential business activities from your home.
If a PE is established, your UK company may become liable for corporate tax in that country on the profits you generate there, which can lead to "dual tax residence," where both the UK and your country of residence claim the right to tax the company.
While double taxation treaties are in place to prevent the ensuing process of being taxed twice, negotiating them is a complex process.
4. Personal Taxation when Contracting from Europe
In the remote contracting scenario you outline, you would also have to comply with the personal tax laws in your country of residence, where you're likely liable for income tax on your worldwide income, including salary and dividends from your UK company.
Regarding other personal considerations, with social security, the UK and the EU have an agreement that generally limits you to paying contributions in just one country.
You may be able to obtain an "A1 certificate" to continue paying UK National Insurance for a limited time. But this is not a long-term solution, as you will eventually have to pay local social security contributions.
5. Immigration and Contractual Issues
Right to Work: Since Brexit (January 31st 2020), UK nationals no longer have an automatic right to live and work in the European Union (EU).
To legally work in your country of residence, you must have the correct immigration permission, such as a work visa or residency permit.
Client and Contracts: The ContractorUK Forum thread featuring your query about how best to work for a UK company but stay based in your European country of residence mentions a "smell test" for honesty.
Again, I agree with the esteemed congregation!
You should always be transparent about your residency with your UK client and any recruitment agents.
Do UK Employers Even Like Remote Contractors?
Due to the associated complications, many UK end-clients and agents hesitate to work with non-UK resident contractors.
Additionally, end-clients (employers) may have concerns about their data being accessed or stored outside the UK, and you might find that geo-filters block access to their systems.
Ensure your business insurance provides coverage for international work.
6. The Grey Area (again); for you = three risks
My conclusion is that while no UK law explicitly forbids your proposed setup, the practical reality is far from simple.
As far as I can tell from the information you’ve provided, the most significant risks to your remote contracting plan are tied to the following three areas:
- The tax laws of your country of residence;
- The potential for creating a permanent establishment for your UK company in your own country of residence, and;
- The need for transparency with clients, and the risk of breaching your contract if you misrepresent your location.
7. Tax Efficiency
In this relatively common remote contracting scenario (living in Europe but using a UK limited company to execute a UK job), arranging your affairs for tax efficiency is often complicated and risky.
Higher personal income tax rates in your European country of residence could eliminate potential savings from a lower UK corporation tax rate.
You also face the administrative burden of managing dual tax residence and the risk of penalties from HMRC and the applicable European tax authority.
Furthermore, be aware that the cost of getting professional international tax advice can often outweigh any perceived benefits, especially where contractors try to engineer a situation with the ‘benefits’ as the starting point.
TLDR: Is it Legal to Work Remotely from Europe via a UK Limited Company?
So, ‘Is it legal to work remotely from Europe via a UK company?’ As you can see, there’s no quick answer, as while it's technically possible, it’s not recommended without extensive professional advice from an accountant and/or tax adviser who is an expert in international tax law.
As to the type of overseas contracting guidance you appear to need, our very own Access Tax and Accounting Ltd specialise in it. Please contact us if you’d like help to safeguard against significant legal, financial, and even reputational risks when remote contracting.
The Expert was Kevin Austin, founder and managing director of Access Financial.
