Having recently covered what the benefits and drawbacks are of operating under your own, private Limited Company for IT Contracts in the UK, it seems the time to also discuss how the situation changes when you are looking to work overseas.
Not all SAP, Oracle and IT Contractors in the UK choose to work abroad, but in our experience, there are few who have not worked on a project outside of the UK at least once. Whilst there are many benefits of operating under an Umbrella Company, a large proportion of contractors choose to operate under their own Limited Company for the financial benefits. But…
How viable is a UK limited company when you work IT Contracts abroad?
Whilst trading under a UK Limited Company whilst abroad is possible, it will not necessarily be the best way of contracting both in terms of simplicity and taxation. Having said this, there are still many who do financially benefit when venturing abroad on new IT Contracts using their UK Limited Company, assuming that they do so for anything up to 182 days (before having to register in the foreign country).
The real term financial benefits largely depend on the particular country you are accepting a contract in and whether you are even able to operate under your own UK Company. For example, in Switzerland, you are generally required to operate through a Swiss payroll services company that is registered for taxation in the Canton (equivalent to counties) that you’re working in and therefore, usually, one cannot trade under their UK Ltd Company. In addition, Switzerland is not part of the EU, but the European Economic Area (EEA), and therefore requires a work permit for employment.
As a contractor, it is possible to work overseas for 182 days (half a year) before being required to register in that country – for some countries this varies, so check before accepting your contract. Once you are registered, you become liable for some contributions in the foreign nation, i.e. local taxation and social security, but again this varies from country to country. What is important is to not become liable for contributions in both the UK and the foreign country.
Get the right advice and consider your options. Consider what is more important to you. Do you opt for simplicity and look at payroll services or are you willing to take on the extra responsibility in order to gain more flexibility over your earnings. Whatever you choose to do, make sure you do not fall foul of the specific tax requirements in either country… unfortunately, just because the nation happens to be a part of the EEA or even part of the European Union, it doesn’t mean the rules are uniform!
At Whitehall Resources, when British Contractors are looking to work abroad, we always advise you to take professional accounting advice regardless of how senior the consultant is. Quite often we that find contractors with their own Limited Companies, however senior, are advised to work abroad under different circumstances to what they are used to.