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Contract work in the UK: taxation, bureaucracy etc.

gustav_errata

pfm Member
Where would one go for dependable and thorough advice/information on doing contract work in the UK? E.g. with regards to paperwork/admin, taxation etc.

I've been offered an exclusive contract with a US company (so no third-party agency or anything) and I'm trying to work out if it is worth the administrative burden to carry out the work here in the UK or if there are any other risks/challenges I need to consider, having always otherwise been a salaried employee. As an additional potential complication for tax purposes, I'm a US citizen (with indefinite leave to remain & work in the UK), although the salary is still below the limit for claiming a foreign-earned income exclusion, so it's probably not an issue.

I have read a couple casual "blog-style" explanations online but I would rather have solid advice about my specific situation. What kind of professional should I talk to (and how much should I expect to pay them, if anything, for their advice)? Are there any knowledgeable people here on PFM who could point me in the right direction?
 
Something you may not be aware of; the whole situation regarding self employed contractor and PAYE has recently changed. If you're working exclusively for one company it is very likely that your employer will have to pay your tax due, NI, etc, through PAYE. The below allows you to decide if that applies to you

https://www.gov.uk/employment-status/selfemployed-contractor

How that varies if the employer is based outside of the UK I'm not entirely sure of. You need to talk to a solicitor or accountant who specialises in these matters.
 
Something you may not be aware of; the whole situation regarding self employed contractor and PAYE has recently changed. If you're working exclusively for one company it is very likely that your employer will have to pay your tax due, NI, etc, through PAYE. The below allows you to decide if that applies to you

https://www.gov.uk/employment-status/selfemployed-contractor

How that varies if the employer is based outside of the UK I'm not entirely sure of. You need to talk to a solicitor or accountant who specialises in these matters.

Thanks! I had already looked at the HMRC page you linked to but it felt like just an iceberg-tip kind of situation. It's a much larger topic than I had imagined during initial discussions with the company (I have not accepted or agreed to the offer in any way yet). So it's difficult to come to grips with. At the moment I'm searching for an accountant in the area but I've only found one so far that even mentions contractors, let alone any that claim to specialise in the topic. My gut is already telling me that the whole thing may not be worth it...
 

Yes...as currently proposed, it looks like I would fall within IR35, especially due to the exclusivity.
Thanks for that, it was the clearest explanation I have seen yet.

I mean, it seems that, aside from the administrative impact, the tax impact shouldn't be too concerning. I'm already paying income tax now, so it's not like taxes will increase for me. I'd just have to make sure that I keep the taxes owed aside until they're due. I would most likely need to add in accountancy fees, though, to help relieve this burden. I'm already a complete bundle of stress when it's time to file my US income taxes, even though they're relatively simple.

However, if I decide that it would be wiser to do the work via an intermediary like a limited liability company, then that significantly increases my admin costs (both financially and temporally).
 
I did exactly this for about a year back in 2015. Living in the UK, dual citizen, working exclusively for a US company. I used an umbrella company to handle the HMRC side of things and it made the US taxes relatively straightforward. If you have any US based income then sometimes the foreign tax credit works out better than the earned income exclusion, though national insurance is not admissible as foreign tax.
I can find the details of the umbrella company I used if it's of any help.
 
I wouldn’t use a limited company, there are costs as you say and no benefit unless you need limited liability. Find a competent local accountant and take their advice. As long as you can provide all relevant information in a tidy format it shouldn’t cost more than £500 pa to have them file your UK tax return.
 
As @kensalriser says, loads of decent local accountants out there. Worth speaking to a few to see how you get on and that they understand your position properly. Unless they have specific relevant experience, probably not a one man band. You certainly shouldn't be looking at the big firms.
 
I'd also recommend using a reputable umbrella company in that situation, as they can sort a lot of your PAYE & HMRC admin in the same way an employer would.
 


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