I need some advice on the tax and legal sides on behalf of some one. She is currently working as a senior secondary school IT/computing teacher full time in Berkshire. She is going to quit and go contracting working for the US based consumer health division of a major company. It’s 100% remote working. This contracting will be through an intermediary, whom may have an international presence. She wants to go the self-employed route than the company route. She is looking for help/pointers pointers as follows: A local (ideally) small accountant and legal who are happy to engage with her and give all necessary advice and do any prep paper work, if required. She is happy to pay for the services. She has spoken with some local firms, who aren’t keen. A recommendation based on personal experience is what we require. She is aware she would need to register for VAT as her earnings from services are likely to exceed £85K a year She wants to understand GDPR/Privacy as a self-employed. She is not sure if this is applicable as the contract is between the intermediary and her. She will be dealing the employees / contractors who are mostly based in the US and no one in the UK / EU. She will not set up a website. Thanks for the help!

Firstly I’m not a lawyer or accountant but I have contracted remotely. I’m a designer not a teacher but I’d expect the tax regulations to be the same for any business. Working for a foreign country as a contracted employee based in the UK carries a lot of different rules and tax implications compared to contracting for a UK organisation. To make this even more complex different countries have different agreements with the UK regarding how tax is applied. The US department of tax will also be involved in some capacity since it’s a US company paying someone. As I understand it, the way it works with some countries, you get a certificate from the country where the company is based saying you’re not resident in that country and therefore should not pay tax, that then goes to HMRC and you get taxed by them. Some countries also hold a percentage also, so you may end up paying a fee/tax in the company country also. This might not apply to the US. Also it’s worth noting IR35 which I’m not sure if it applies to foreign contracting. It’s a complex ruling but it was brought in so any contractor who is basically an employee in everything but title, has to be taxed in the same way as an employee, and usually this needs to be done through an umbrella company. Again though that might only be UK contracts. I’d guess it would need to be done under a limited company, so that would need to be set up. Ltd companies are treated the same regardless of size so there are a lot of documents etc that need to be filed. Accounts should also be run well and kept up to date. Long story short, get a good accountant and explore every aspect of it. It’s not the most complex thing in the world but it also isn’t as easy as just being an employee. Bear in mind from my experience some small time local style accountants will have not had experience working with foreign contracts/trade. I’d advise finding one who is well versed in doing so. I’d highly recommend not trying to do accounts, it gets very complex and you can get fined for mistakes. Also, and this may not be relevant, but if you’ve got any big life purchases coming up, mortgage amends etc then typically you’ll need two years of accounts before they’ll factor it as income. This isn’t exclusively true but it can be tricky to secure financing as a contractor without extensive accounts. One more thing, you don’t get sick pay or holiday pay. This makes it easy to get to a holiday and think ‘this is costing me X in lost earnings per day’. This is why on the face of it contracting can seem very lucrative but when you factor holiday, sick pay and things like pension contributions, it becomes more balanced. Sorry to sound so negative, it’s just not straightforward and whilst it gets easier, it can be overwhelming initially.

Ernie1 Thank you so much. Oh dear! I looked up. You are right. It’s more complicated when a limited company needs to be set up. Self-employed is not worth it as non-resident certification needs to be obtained. Ltd company may solve the issue as one can set up a PAYE code. Will have to check if the intermediary has a local presence as contract will be with them, although the remote work is for the US firm. The local tax companies (big ones) aren’t keen. Don’t think this can be resolved in a week as the person has the month end deadline to give notice to start work in April. Otherwise, the start date can be only in Aug. Will talk another accounting firm.

No worries. Setting up a ltd is actually quite straightforward to do yourself, but then it adds a lot of tax implications that almost certainly need an accountant. Obviously you’re filing accounts for the company and it’s profits/losses and then for an individual on top. You also need to file accounts even if the company hasn’t traded, as long as it’s active, it needs accounts. I think your idea to find out if there’s a UK office/intermediary is a great one as it would make it somewhat simpler. But yes, a good accountant is crucial and I appreciate it’s not easy to find one. I actually only know a lot of this as I recently turned down a lucrative contract for a foreign company based on the fact it was going to be such an administrative headache.

Ernie1 was going to be such an administrative headache. Could you elaborate please? Did it involve the US and what the admin issues are? How does the GDPR works if between B2B (agent and the US firm’s employees) or between a self-employee and the business (agent and the US firm’s employees)? Don’t really think these can be sorted in a week to sign a contract and give a notice by 28 Feb. Thx

LMSC It wasn’t the US, but not a EU country. Basically the first issue was that the country in question has a withholding rule where 10% of the income automatically gets withheld by the home country of the company. I then needed to obtain a certificate of tax residency from the company I was to be working with each month which then goes to HMRC. The risk was that if there was a delay or difficulty in obtaining anything then it could cost me more tax or worse, fined. My experiences in 20 years of dealing with HR / Payroll is that things don’t move quickly. The other issue for me was liability insurance. This is probably industry specific but as a design contractor working with very large tech companies, I’m required to have liability insurance to cover an enormous sum, I can’t remember exactly but I think it’s a billion pounds or something. It was a grey area as to whether I was covered with this inter-country agreement so a risk not worth taking. Again so much of this is unique to the individual, the industry and the companies involved so I think you’re doing the right thing by seeking an accountant/legal aide. Sadly it’s just tricky to find a good accountant. One factor I think might be at play here is that some accountants have a flat fee for end-of-year small company accounts, so obviously if it looks like its going to be a lot of work, they might not be interested. Sorry I can’t be of help on the GDPR thing. That’s a whole other mountain of legislation.

When I was Contracting I used a company called Matthews&Co based in Swansea. (I am Suffolk based so we did everything by phone and email). He came recommended by another contractor working at the same place. Mike Matthews is very approachable and quite knowledgeable. He set up my limited company for me. If you are working through an intermediary then your contract is with them not the US company and it’s the intermediary company that pays you. How this works for non domicile companies, i’m not sure. As Ernie1 stated, IR35 has now taken effect and that is another ball game. If the intermediary is UK based then this contract could well be covered by IR35. A lot of intermediary companies do not like dealing with a number of limited companies and therefore request that you go via an Umbrella company (who they usually have a deal with) or via PAYE.

Ernie1 That’s quite a lot of information. Thank you. Setting up a limited firm perhaps simplify the tax rules between the US and UK as it will be a B2B and is unlikely to require a resident certification. I am not sure the US has a withholding tax rule. Liability is another grey area, while taking Prof Indemnity Insurance is a good back up. I understand the opportunity is more of an agile PM role and I think it is a low-risk. A lot depends if the intermediary has the UK presence and IR35 applies. If it does, the NI deductions could be double, assuming the intermediary charges the employer NI on the contractor. They shouldn’t as they should be charging the US firm. If they did charge the contractor, the whole proposition is worthless at peak rates (30% NI and 45% tax) Thanks Nightrider_1uk I will check Matthews&Co. James Cowper Reading used to take care of the company, which I had years ago, accounts. Perhaps, I will provide the connect. A chat with the intermediary is the next logical step.

Slight change of subject but Agile PM is also role that features in my industry (as part of the development of digital products/services). Is this person experienced in being an Agile PM (Agile certified etc)? If so, they can be quite lucrative roles in the UK, and even more so if transitioning into Product Manager (£100k+ is common), which is a kind of strategic version of a PM who understands metrics and KPIs. Just in case it turns out to be a headache working for the US contract, there may be a fair few options in the UK. A strong LinkedIn profile and good tech recruiters will help with finding them.

LMSC I am not sure the US has a withholding tax rule It does.

Tax and Legal service - some contacts required

DavecUK

I remember moving from self employed to working for an American oil company. Their tax is complex and they have good accountants. I had real tax issues in the UK and no proper records, plus tax returns etc.. to do. I also owed a fair bit of tax. I was told to bring in whatever I had e.g. recpts, contracts, P60 etc… and it would be sorted out one way or another.

I placed a shoebox full of stuff with the accountants and never heard a word from the UK tax people after that, and nothing to pay. 😁

« Previous Page