Using a UK limited company abroad after Brexit: 11th hour overview

Putting aside the apparent deadlock in Brexit negotiations between the UK and the EU as divorce day fast-approaches on December 31st 2020, there’s still going to be two ways to work abroad using a UK limited company. Firstly, ‘legally’ and secondly ‘illegally, writes Kevin Austin, managing director of overseas contracting firm Access Financial.

We won't explore the latter here as this way was no good before December 31st 2020 (the end of the UK’s transition period), and will not be any better in the era post-Brexit. If flying below the radar with foreign tax, social security, VAT, and employment authorities is your idea of responsible contracting, then we have no advice for you other than this: don't do it.

As to from January 1st 2021, barring a last-minute miracle emerging from the currently stuck negotiations, contracting using a UK limited company abroad will be very much the same in the EU as it will be elsewhere in the world.

Tier three (of a different kind)

Unless, that is, you were already in the EU country on the 1st, registered there and/or are working in-country lawfully by the 1st. If that’s not the case, every country will likely treat you, a UK tax resident, as a ‘third-tier’ country national, which means a work permit will almost certainly be required.

By its very nature, your UK limited company is not a local entity abroad, and will be unable to sponsor a work permit for you, as an employee of your own company. The only practical route envisaged at this stage is to apply for a ‘self-employed’ work permit. But beware -- these do not exist everywhere and where they do, they are generally becoming harder to obtain.

Our experience is that this is particularly so in the case of Germany, where it used to be relatively easy to obtain a permit to live and work there as an independent worker. But no more.

Exceptions to the new difficulty of contracting in the EU

Most Britons acting as the director of their own limited company are therefore going to find it increasingly hard to start working in the EU, or further afield, via their existing PSC (Personal Service Company) from January 1st 2021 onwards. Unless that is, they already have the legal right to work in the EU country in question -- or can acquire it through marriage, ancestral rights or investment schemes.

For argument’s sake, let's assume you do have the legal right to work in the EU or elsewhere overseas post-Brexit. What else might you face? Unfortunately, there are some imponderables.  

This is because throughout the Brexit negotiations, all the discussions about trade centred around goods. Discussion on services was not on the table as far as the EU was concerned. So we still do not know what will happen about companies from the EU being able to operate freely in the UK and vice-versa. And, whatever happens in the few days left before the, it will be agreed only on a reciprocal basis.

What's changing; what's not

Under the EU-wide social security agreements, it is possible to work abroad yet remain in your home country's social security system, subject to meeting certain conditions. The authorities issue documents which are called Certificates of Coverage, which enable this to happen. Within the EU these are called 'A1s.'

Well, what we do know, definitively, is that A1s between the UK and the EU will end with the ending of the Free Movement of Persons. Therefore, when an EU-based director works in the UK using his or her company or vice versa, they will face having to pay local social charges or NICs and not home ones.

Fortunately, what will not change are the double-taxation treaties between states as these are not EU-wide but bilateral agreements. The Common Travel Area will also not change so that nationals of the United Kingdom, the Republic of Ireland, the Channel Islands, and the Isle of Man will be free to live and work in each others’ territories.

Six key compliance areas

Yet UK limited companies operating abroad (no matter where) will have to observe the law in their envisaged work-country relating to:

  • foreign employers;
  • permanent establishments;
  • VAT;
  • income tax;
  • social security; and
  • employment law

Abiding by your work-country’s individual, specific requirements in relation to these six areas will be key if you and your UK limited company are to avoid trouble with the in-country authorities.

Final thoughts

Our advice (at this stage) is that unless you are very sure of your expertise in these compliance matters do not attempt to administer them unadvised, alone. Frustratingly for bonafide contractors who want to work in an EU country, it looks like it will usually be simpler for limited company contractors to work as an employee of the end-user, although the retentions on offer might be substantially lower than such freelance professionals might have realised using their UK-registered business pre-Brexit.

Tuesday 15th Dec 2020
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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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