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UK expat contractors with own companies face tax shock
| Published: | 17 May at 6 PM |
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New Inland Revenue regulations governing personal service companies may cause increased tax burdens for expat single owner businesses.
The new tax laws, brought in on 6 April this year, will affect oil workers on contracts as well as other single-owner businesses.The focus of the changes is on the individual whose right it is to ‘supervise, control and direct’ (SDC) the contractor on-site, even if the right is not used. Should a third party have an SDC right, a raft of new tax measures will apply.
Firstly, contractors working for third parties, umbrella companies or recruitment agencies will not now be able to claim travel or accommodation costs, thus losing tax relief on expenses incurred. Personal service companies not covered by the SDC test are now treated under IR35 rules, in that contractors must pay National Insurance and tax on the deemed amount earned from each contract. For overseas contractors paying social security and taxes abroad which are offset against UK payments under double taxation rules, the issue is far more complicated.
Contractors are assumed to have failed the test for SDC unless they are able to prove their eligibility. Proof includes all contracts being approved by either a review panel, the HMRC helpline or a professional adviser. Those most likely to be affected include IT contractors, oil rig workers and HGV drivers.
Meanwhile, for expats working, living or retiring overseas, it’s essential to check whether an already existing life insurance policy is valid once the policyholder is no longer resident in the UK. Many expats don’t realise that most UK-based insurance companies do not allow existing policies to be transferred to an overseas address.
Those planning to emigrate or work overseas for a period of time are best advised to buy life cover from an offshore provider. However, options are few, especially for those planning to work in the Middle East, and are probably non-existent for those moving to or near any war-stricken or unstable country.
The new tax laws, brought in on 6 April this year, will affect oil workers on contracts as well as other single-owner businesses.The focus of the changes is on the individual whose right it is to ‘supervise, control and direct’ (SDC) the contractor on-site, even if the right is not used. Should a third party have an SDC right, a raft of new tax measures will apply.
Firstly, contractors working for third parties, umbrella companies or recruitment agencies will not now be able to claim travel or accommodation costs, thus losing tax relief on expenses incurred. Personal service companies not covered by the SDC test are now treated under IR35 rules, in that contractors must pay National Insurance and tax on the deemed amount earned from each contract. For overseas contractors paying social security and taxes abroad which are offset against UK payments under double taxation rules, the issue is far more complicated.
Contractors are assumed to have failed the test for SDC unless they are able to prove their eligibility. Proof includes all contracts being approved by either a review panel, the HMRC helpline or a professional adviser. Those most likely to be affected include IT contractors, oil rig workers and HGV drivers.
Meanwhile, for expats working, living or retiring overseas, it’s essential to check whether an already existing life insurance policy is valid once the policyholder is no longer resident in the UK. Many expats don’t realise that most UK-based insurance companies do not allow existing policies to be transferred to an overseas address.
Those planning to emigrate or work overseas for a period of time are best advised to buy life cover from an offshore provider. However, options are few, especially for those planning to work in the Middle East, and are probably non-existent for those moving to or near any war-stricken or unstable country.
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