An introduction to contracting abroad

In an increasingly digital age, contractors are finding it easier than ever to carry out work whilst based overseas.

The flexibility to live and work abroad is of course appealing, and is definitely something within reach – provided adequate planning is carried out ahead of time. There are tax implications as well as foreign contract law to contend with, and failing to organise yourself ahead of time can lead to costly repercussions down the line. If you’re planning on contracting abroad for a short time (a few months), there may not be any extensive planning required, but leaving for longer periods of a few years will mean having to change your resident status as a taxpayer. Even then, if you live abroad and make frequent returns to the UK, you may still be liable to pay UK tax. Depending on how much time you spend in the country, you may be eligible for “split-year” tax, through which you only pay tax on the capital gains and income earned in the duration of your time in the UK.

Before expat contractors think about taking the plunge, there are a few things to be aware of before opting to work overseas.

Things to consider before contracting abroad

Before you go abroad, it’s important to check the laws surrounding contracting as an expat in your desired destination.

If you are planning a permanent relocation, it may help to solicit the advice of a local tax expert pertaining to residency tax laws in your chosen country. One of the first mistakes to avoid is assuming that by moving abroad, you will enjoy a tax-free grace period after moving. Unfortunately, no such grace period exists, and although some countries may allow you to live and work there without paying tax for a certain period of time, you will always be subject to taxation on those earnings eventually to someone, at some point. With that said, you will not have to pay tax twice on your earnings, as there are double taxation agreements in place between the UK and many other countries. If you are unsure about to whom tax on your earnings are payable, it’s wise to consult with an accountant that can help you mitigate the amount due whilst remaining compliant. You should also determine your residency in the eyes of Inland Revenue, as this will determine whether or not you need to file a UK tax return inclusive of foreign earnings.

If you are planning on contracting within the EU, you will not need to make any visa arrangements; however if you’re looking to move further afield, you should make sure you have the right visa in place before doing so. One important piece of contract law that will always apply if you are a UK tax resident – no matter where you are in the world – is IR35. IR35 legislation designed to catch out contractors “disguised” as employees, making them liable to pay tax and NI contributions as a full-time employee. The legislation came into effect in 2000, and although having been widely criticised by contractors and accountants/tax experts alike, it remains in effect – even for British contractors abroad. You may be inside or outside IR35 depending on a number of factors, which can mean paying potentially a great deal more in tax on your earnings.

In addition to paying tax on your earnings, it’s important to remember that you need to keep on top of National Insurance contributions, especially if you plan on returning to the UK eventually, as failing to make these can mean losing your state pension among other things.

How Futurelink Group can help

Contract law and taxation when you are self-employed can be tricky on the best of days, but perhaps especially so when dealing with it from overseas.

At Futurelink Group, we have a number of solutions that are designed to help contractors abroad to make the most of the tax benefits, and navigate any grey areas when it comes to paying tax on earnings as a sole trader or limited company. If you are unsure about your status, we can help you determine whether you are inside or outside of IR35. If you are found to be inside, we can help you receive PAYE earnings through our umbrella company solution.

Our global Umbrella PAYE services can be hugely beneficial to anyone considering contracting abroad. No matter how long you are working abroad, you can make sure you remain compliant with tax laws whilst making the most of your earnings with our contractor umbrella services. Setting yourself up to receive your earnings through this system is, first and foremost, the easiest way to make sure you are paying the right tax as well as your NI contributions on time. Enlisting our Umbrella PAYE solutions also makes you eligible for our tax advisory service, which can be especially useful when working abroad.

With an umbrella company, if you are liable to pay tax in the UK, you can make sure it is being done so correctly and in a timely manner with help from our experts. At Futurelink Group, we will calculate your net salary after NI and income tax contributions, and pay it directly into your bank account, notifying you via text when we do. You can have faith that your take home pay is as much as it can be, whilst remaining in the scope of legal tax mitigation. Our experts will help find the best solutions that are fully HMRC compliant, yet still tax efficient for you as a contractor.

Contracting abroad presents a number of great opportunities, and fear or confusion surrounding the tax implications of doing so shouldn’t get in the way of you exploring them. Whether you are new to contracting or have an established limited company, we can provide affordable assistance to make sense of contracting overseas to help you make the most of the experience.

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William Cadden, Self-Employed Contractor

“For me, Futurelink Group was the best solution, as a foreign and a lack of knowledge of the UK rules, they were extremely helpful in all aspects. Always fast in answering all my questions. I almost didn’t do anything and they put me on track to invoice and receive my payments. I can fully recommend them.”

Ronaldo, Umbrella PAYE contractor

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Michelle Hughes, WS Contractors Ltd

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