The ease or difficulty of operating in the European Union now that Brexit has been completed remains to be assessed. There is no doubt that the need for contractors' skills and experience will continue to exist throughout Europe and beyond.
Living and working abroad permanently
You will typically cease to be a UK tax resident on the day you leave the country permanently. Similarly, you may anticipate being classified as a tax resident of your new home nation from the moment you arrive.
Each country will have its own laws about when tax residency begins, so make sure you know what they are before you go. For instance:
- Even if you have left the UK and become a tax resident elsewhere, you will very certainly be required to continue paying UK taxes on certain types of income earned here;
- Under the UK's non-resident landlord laws, you'll still be charged UK tax on your net rental income if you continue to own UK property that you rent out;
- Additionally, state and occupational pensions from the United Kingdom may continue to be taxed in the United States.
Working abroad on short-term contracts
Contractors who are given short-term work abroad should expect to receive general tax guidance from the country where they will be working. This information could come from the Agency or the end client. Advice on whether it is more efficient to work on a direct employment contract, through an umbrella business, or through a UK firm if this is permissible may also be offered.
Determining a person's true tax residence can be difficult, especially if the individual works in several countries over the course of a year, and comprehensive assistance should be obtained if clarification is required.
Contacting the UK tax authority about living or working abroad
You do not need to notify HMRC (HM Revenue & Customs) if you are a UK employee who is sent to work overseas on a temporary basis and is still paid by your UK employer. The majority of these 'detached duty' arrangements, as well as any notifications made by them, will be handled by your employer's HR or Payroll teams.
HMRC should be notified of any permanent relocations abroad. You will be able to determine the extent of any residual tax liability you may have, as well as any tax repayments to which you may be entitled if you give them advance notice.
Non-resident landlords and UK contractors with more intricate tax residence difficulties, as well as those who need to claim foreign tax credits, should use the Self-Assessment Tax Return system to communicate with and advise HMRC.
What are the advantages and disadvantages of contracting overseas?
Working in a foreign country can be difficult for the uninformed, who can easily contravene employment rules that carry severe penalties. Working in a foreign country can be difficult for the uninformed, who can easily contravene employment rules that carry severe penalties. Here are some of the benefits and drawbacks of working with companies in other countries.
Advantages
- Contractors earning more than £114,869 pay 58.95% income tax in Aruba, but they can save 3% if they are married and their spouse is with them.
- Employers in Spain traditionally provide a bonus equivalent to one month's pay in July and December, implying that staying for a year entails receiving pay for 14 months.
- For the first 183 days of their first year in Brazil, contractors are given a six-month grace period, even if the days are not consecutive. Contractors are treated as non-residents at this time and do not have to pay any taxes.
Disadvantages
- Sweden's government is well-known for enforcing tax compliance among contractors. Tax officials have greater authority than police officers, and they have been known to seize premises suspected of housing unregistered workers.
- In Belgium, contracting pays well, but to qualify for the money, contractors must hold a university degree or have a family who does and is ready to endorse their employment application. Those without a degree may be required to take a test or work full-time rather than freelance.
- There are hidden costs of living abroad that you should be cautious of before making the move. From purchasing a plane ticket to transporting your belongings to your new home. Moving abroad is a big and ongoing commitment, whether it's working out other tax systems or contributing to various medical and social security schemes.
Working overseas is still a realistic choice for contractors with marketable talents searching for new chances, despite the Coronavirus pandemic, and there are many job sites that can help you locate those opportunities.
There may be short-term obstacles, but thorough research, your agency's assistance, and the advice of your professional advisers can help pave the way for a better future.
Persona Finance promises to make your company's life easier by offering essential accounting and business services to all types of businesses, including contractors. For more information on how we can add value to your company, please contact Persona Finance at [enquiries@personafinance.co.uk].
