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Old 23.02.2010, 16:13
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Short term contract in the UK - What is the best tax option for me?

Hello all,

I'm English and I have been living in Switzerland for two months and looking for work in the I.T sector, but so far without any success. I’ve recently been offered a short term contract from a previous employer in London and I’m on the brink of accepting the offer purely for financial reasons (My Swiss wife and I got married last year and then spent 9 months travelling around South America, so my wallet has incurred a very large dent!). The contract would last between three and five months and I can expect to earn £11k to £18k depending on that contract length.

My question is this: What is the best way of working this contract in terms of tax? The easiest option I can think of is to work under an umbrella company in the UK and pay tax/NI as normal, but I’m wondering if there is a more tax efficient way taking into account that I’m now a Swiss resident. I would be returning to Switzerland for some but not all weekends during the contract term if that makes any difference to suggestions.

Any advice is greatly appreciated!!
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Old 23.02.2010, 17:19
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Re: Short term contract in the UK - What is the best tax option for me?

<!!! the legality of this advice would likely be hotly contested by the UK tax dept, so any use you make of it is entirely at your own risk !!!>

If you can demonstrate that you are not resident in the UK and that you are submitting a tax return elsewhere, then you can avoid paying UK tax completely.
Firstly, find an off-shore umbrella company. They have a UK company to bill your agency/client but will actually pay you out from a non-UK company. If anyone (eg. agency) wants your address, give your Swiss one. The umbrella company will ask for some confirmation that you're not UK resident and that you intend to manage your own tax affairs. They will then pass the entire billable amount through to you, minus only their commission.
Have your earnings paid into an off-shore account and keep it secret. Don't keep any records of when you're actually in the UK.
You're not likely to be working in the UK long enough to get any attention but if you do later get questioned then say that you declared your earnings in Switzerland. You don't have to show what you declared, just that you filed a return.

This approach worked well for me for several years and I've never had any comeback.
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Old 09.10.2015, 14:12
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Re: Short term contract in the UK - What is the best tax option for me?

Dear lux_interior, would you be kind enough to share your more resent experience on this topic (family living in Switzerland, working on a contract in the UK). Thank you
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Old 09.10.2015, 14:23
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Re: Short term contract in the UK - What is the best tax option for me?

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If you can demonstrate that you are not resident in the UK and that you are submitting a tax return elsewhere, then you can avoid paying UK tax completely.
At the time this was written it was misleading, it's completely incorrect to think that just submitting a tax return to another jurisdiction helps in any way with being UK tax resident. Many people are tax resident in multiple countries.

More recently the HMRC has published a statutory definition of residence, depending on connections to the UK. It's quite complicated.

https://www.gov.uk/government/upload...ted_078500.pdf
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Old 09.10.2015, 17:09
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Re: Short term contract in the UK - What is the best tax option for me?

@fatmanfilms: If I understand it correctly one can be a resident for tax on local (UK) income purposes, but non-domicile for worldwide income. So, if my family lives in Switzerland and I am working on a contract in the UK as an employee of a Swiss contracting company, I only pay tax on the income from that company if I bring it into the UK, right?
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Old 09.10.2015, 17:22
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Re: Short term contract in the UK - What is the best tax option for me?

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@fatmanfilms: If I understand it correctly one can be a resident for tax on local (UK) income purposes, but non-domicile for worldwide income. So, if my family lives in Switzerland and I am working on a contract in the UK as an employee of a Swiss contracting company, I only pay tax on the income from that company if I bring it into the UK, right?
Possibly....
Where was your father born & did he have a British passport.

If you hold UK domicile by birth it's very difficult to ever loose it.

Any money you earn from working in the UK would be taxable, plus any foreign income remitted. If you failed to declare the earnings from the UK employment it would be intentional tax evasion. The revenue has got very hot on such avoidance measures.
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Old 09.10.2015, 17:25
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Re: Short term contract in the UK - What is the best tax option for me?

@fatmanfilms: I do not hold a UK domicile.
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Old 09.10.2015, 17:27
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Re: Short term contract in the UK - What is the best tax option for me?

Dear Savski, I would be grateful if you could share you experience on contracting in the UK while still having your family live in Switzerland. How did it work out for you in the end? How did you arrange your affairs, such as: tax (both in the UK and Switzerland), umbrella company vs ltd, UK company vs Swiss, etc. Thank you
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Old 09.10.2015, 17:28
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Re: Short term contract in the UK - What is the best tax option for me?

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@fatmanfilms: I do not hold a UK domicile.
Then you could be taxed on a remittance basis, however after 7 years you have to pay £30,000 in tax per year, rising to £50,000 in tax per year after 12 years.
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Old 09.10.2015, 17:30
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Re: Short term contract in the UK - What is the best tax option for me?

Regardless of income actually earned?
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Old 09.10.2015, 17:39
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Re: Short term contract in the UK - What is the best tax option for me?

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Regardless of income actually earned?
Yes...... Or you can just pay tax on your world wide earnings & capital gains at normal UK rates.
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Old 09.10.2015, 17:42
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Re: Short term contract in the UK - What is the best tax option for me?

If you continue to live in Switzerland, return regularly, work less than 183 days in 12 months abroad and you are not paid by the operation in the UK, the below says that you should be taxed in Switzerland where you are domiciled. If you don't meet these criteria, you should pay taxes where you work, i.e., UK. See this for details:

Wochenaufenthaltsort
  • Im internationalen Verhältnis
    • Person mit unbeschränkter Steuerpflicht in der Schweiz und Erwerbstätigkeit im Ausland
      • = Person arbeitet in einem andern Staat und kehrt regelmässig an den schweizerischen Wohnort zurück
      • Grundsatz
        • Besteuerung nach dem Arbeitsortsprinzip gemäss OECD-MA
        • = bei unselbständig erwerbender Person hat das Besteuerungsrecht des Wohnsitzstaates hinter jenes des Arbeitsort-Staates zu treten
      • Ausnahme
        • Monteurklausel
        • (kumulative) Voraussetzungen für Besteuerung durch die Schweiz
          • Fortbestand des steuerlichen Wohnsitzes in der Schweiz
          • Person hält sich nicht länger als 183 Tage innerhalb von 12 Monaten während des betreffenden Steuerjahres im Arbeitsort-Staats auf
          • Lohn wird von Arbeitgeber bezahlt, der nicht im Arbeitsort-Staat Sitz hat
          • Lohn wird nicht von Betriebsstätte bezahlt, die der Arbeitgeber im Arbeitsort-Staat hat
http://www.wohn-sitz.ch/steuerdomizil-wochenaufenthalt
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Old 09.10.2015, 17:45
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Re: Short term contract in the UK - What is the best tax option for me?

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Yes...... I don't understand what is your real question.
You said that "after 7 years you have to pay £30,000 in tax per year, rising to £50,000 in tax per year after 12 years."

So, would one have to pay this tax even if one no-longer works after 7 years and there is no more income from anywhere (say retire and live on savings)?
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Old 09.10.2015, 17:45
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Re: Short term contract in the UK - What is the best tax option for me?

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If you continue to live in Switzerland, return regularly, work less than 183 days in 12 months abroad and you are not paid by the operation in the UK, the below says that you should be taxed in Switzerland where you are domiciled. If you don't meet these criteria, you should pay taxes where you work, i.e., UK. See this for details:

Wochenaufenthaltsort
  • Im internationalen Verhältnis
    • Person mit unbeschränkter Steuerpflicht in der Schweiz und Erwerbstätigkeit im Ausland
      • = Person arbeitet in einem andern Staat und kehrt regelmässig an den schweizerischen Wohnort zurück
      • Grundsatz
        • Besteuerung nach dem Arbeitsortsprinzip gemäss OECD-MA
        • = bei unselbständig erwerbender Person hat das Besteuerungsrecht des Wohnsitzstaates hinter jenes des Arbeitsort-Staates zu treten
      • Ausnahme
        • Monteurklausel
        • (kumulative) Voraussetzungen für Besteuerung durch die Schweiz
          • Fortbestand des steuerlichen Wohnsitzes in der Schweiz
          • Person hält sich nicht länger als 183 Tage innerhalb von 12 Monaten während des betreffenden Steuerjahres im Arbeitsort-Staats auf
          • Lohn wird von Arbeitgeber bezahlt, der nicht im Arbeitsort-Staat Sitz hat
          • Lohn wird nicht von Betriebsstätte bezahlt, die der Arbeitgeber im Arbeitsort-Staat hat
http://www.wohn-sitz.ch/steuerdomizil-wochenaufenthalt
That won't prevent the UK liability as the money was earned in the UK, even if not paid in the UK. The UK liability is probably higher in any case.
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Old 09.10.2015, 17:46
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Re: Short term contract in the UK - What is the best tax option for me?

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If you continue to live in Switzerland, return regularly, work less than 183 days in 12 months abroad and you are not paid by the operation in the UK, the below says that you should be taxed in Switzerland where you are domiciled. If you don't meet these criteria, you should pay taxes where you work, i.e., UK. See this for details:

Wochenaufenthaltsort
  • Im internationalen Verhältnis
    • Person mit unbeschränkter Steuerpflicht in der Schweiz und Erwerbstätigkeit im Ausland
      • = Person arbeitet in einem andern Staat und kehrt regelmässig an den schweizerischen Wohnort zurück
      • Grundsatz
        • Besteuerung nach dem Arbeitsortsprinzip gemäss OECD-MA
        • = bei unselbständig erwerbender Person hat das Besteuerungsrecht des Wohnsitzstaates hinter jenes des Arbeitsort-Staates zu treten
      • Ausnahme
        • Monteurklausel
        • (kumulative) Voraussetzungen für Besteuerung durch die Schweiz
          • Fortbestand des steuerlichen Wohnsitzes in der Schweiz
          • Person hält sich nicht länger als 183 Tage innerhalb von 12 Monaten während des betreffenden Steuerjahres im Arbeitsort-Staats auf
          • Lohn wird von Arbeitgeber bezahlt, der nicht im Arbeitsort-Staat Sitz hat
          • Lohn wird nicht von Betriebsstätte bezahlt, die der Arbeitgeber im Arbeitsort-Staat hat
http://www.wohn-sitz.ch/steuerdomizil-wochenaufenthalt
And also, from the UK side, not replace a UK based employee. So effectively it's relatively easy to do a placement within your own company, or as a consultant as part of a project with a Swiss component, but they may object to simply using a Swiss umbrella company as a contractor.
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Old 09.10.2015, 17:48
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Re: Short term contract in the UK - What is the best tax option for me?

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That won't prevent the UK liability as the money was earned in the UK, even if not paid in the UK. The UK liability is probably higher in any case.
Except for short term (< six months) - otherwise if I went back to the UK with my own company for a couple of weeks I'd be liable!
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Old 09.10.2015, 17:48
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Re: Short term contract in the UK - What is the best tax option for me?

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You said that "after 7 years you have to pay £30,000 in tax per year, rising to £50,000 in tax per year after 12 years."

So, would one have to pay this tax even if one no-longer works after 7 years and there is no more income from anywhere (say retire and live on savings)?
Only if you still wish to be taxed as a non dom, if you are happy paying tax on your world wide income & capital gains you can switch to normal taxation.

People who pay the £30/50K do so as it's to their advantage, it's a recent change as many extremely wealthy non doms lived in the UK for many years & paid ZERO tax.
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Old 09.10.2015, 17:57
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Re: Short term contract in the UK - What is the best tax option for me?

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Except for short term (< six months) - otherwise if I went back to the UK with my own company for a couple of weeks I'd be liable!
Well if you work for 40 days in the UK, you have accommodation the maximum would be 120 nights at midnight even after being out of the country for 3 years.

If you spent 90 nights in the UK in either of the last 2 tax years, was UK resident in the last 3 years or have family in the UK it will be significantly less than 120 nights in the UK.

As little as 17 nights in the UK, can make you UK tax residence, in the worst scenario.

https://www.gov.uk/government/upload...ted_078500.pdf
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Old 09.10.2015, 18:03
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Re: Short term contract in the UK - What is the best tax option for me?

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... but they may object to simply using a Swiss umbrella company as a contractor.

I am not sure I understand your last point. Who are "they"? And how can "they" object to two companies signing a contract, no matter where it is based?
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Old 09.10.2015, 18:04
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Re: Short term contract in the UK - What is the best tax option for me?

Edit to my comment at 16:42 above (which I am unable to edit.):

The above is relevant for employees, not independent contractors.

The following applies to independent contractors and similar:

http://www.contractoruk.com/overseas...avoid_tax.html
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