If you’re offered the opportunity to contract abroad, it may be tempting to grab your passport and rush off to the airport. Not many people would blame you for doing this, as depending on the country you’re contracting in, you could have year-long sun, a chance to learn another language and expose yourself to new cultures and working practices.
But, before you pack up your belongings, it’s vital that you get professional advice from an experienced contractor accountant, as contracting abroad can be complex, particularly in terms of tax.
Contracting in the EU
Contracting in the 28 European states has always been popular because as a member of the EU you don’t need a visa or permit to travel to these countries. However, some countries may require you have to some sort of permit or authorisation before you can work as a contractor.
At the moment it is still not clear what impact Brexit will have on contractors but if you’re thinking of contracting in the EU maybe it would better to wait. At least until 31st October – the date we are supposed to exit with a deal or not!
Contracting outside of the EU
Contracting in countries outside of the EU is a little more complex as you’ll be required to have a visa. This is can be a lengthy process and it may involve the company you’re contracting for sponsoring you.
This places a restriction on who you can work for. Some countries offer a special visa for skilled contractors but again these can be difficult to obtain.
Taxation and contracting abroad
Contracting abroad may mean you still have tax liabilities here in the UK. To be outside of the UK tax system and adopt the tax system of the country you’re contracting in you must remain outside of the UK for one whole tax year.
Also, if you choose to contract through your limited company while you’re abroad you will have to pay corporate taxes in the country, you’re contracting in. The UK has one of the lowest levels of corporation tax (currently 19% and with plans to drop it to 17% in 2020/21) and rates vary substantially in different countries. So, contracting through a limited company is not always advisable!
In this case, contracting through an umbrella company is a good alternative. Even though there will be charges to using an umbrella company, in some cases it can be the quickest route to contracting. And, some countries, such as Belgium, France, Germany and the Netherlands require contractors to work through an umbrella company or payroll company as they’re sometimes referred to.
IR35 and contracting abroad
If you are a UK resident and your limited company is registered in the UK, then IR35 is still a consideration. It’s, therefore, best practice for every new contract to undergo an IR35 review. This service is offered for no additional charge as part of some of our monthly accounting packages.