Accounting and Tax For Contractors Over Seas

ACCOUNTING AND TAX FOR CONTRACTORS OVERSEAS

A quick and easy guide to accounting and tax for over seas contractors

Modern-day technology and travel, have made it easier than ever before to work anywhere in the world, you will still need to organize your finances and abide by the tax laws.

It is recommended that you keep yourself informed about local tax laws when working overseas.

RESIDENCY

In the UK if you are deemed as a non-resident, you will only pay tax on your UK income and will not pay tax on their foreign income. Residents of the UK usually pay tax on all their income, from the UK and overseas.

UK residency is dependent on how many days one has spent in the UK during the tax year from 6 April to 5 April.

You are a resident if:

• You have spent 183 days in the UK during the tax year
• The only home you have is in the UK and you owned, lived in, or rented it for 91 days at least and spent at least 30 days there in total.

If you leave or move to the UK, that tax year you can claim 'split year treatment' where the year is split in two, resident and non-resident'. Therefore, you will only pay tax on foreign income for the time you were living in the UK.

Becoming a non-resident for tax reasons:

If you are making arrangements to move abroad and work overseas permanently, you will be considered a non-resident from the day you leave. You will need to be aware that to remain a non-resident you will have to keep your visits within the 183 days limit during a tax year.

TAXATION IN THE COUNTRY OF WORK

Tax legislation and procedures differ from country to country You may be at risk of your income being taxed twice, for example, if you are a cross-border commuter, posted abroad for a period of time, you live and are seeking employment overseas, or if you have retired in one country but receive your pension from another.

However, most countries have double taxation agreements where the amount of tax you paid in the country of employment can be offset against the tax you owe in your country of residence, or income earned from your country of work may only be taxed in that country and not liable to tax in your country of residence.

Tax rates in your country of residence and country of work will most probably differ and you will need to keep this in mind – if the tax rate in your country of work is higher then that will be the rate of tax you will pay on your earnings.

To be able to claim double taxation relief you will need to prove the country where you are resident and the existing taxes you have paid on your income.

THE EU

Visiting Europe from January 1, 2021 for business travel, including for meetings, conferences, providing services, or touring, you may need to check the entry requirements, insurance, and if you need to notify HMRC that you will be working in the EU.

WHAT EXPENSES CAN YOU CLAIM WHEN CONTRACTING ABROAD?

Claiming expenses are the same if you were contracting in the UK, therefore anything that is 'wholly and exclusively' purchased for business purposes are eligible to be claimed for.

It is recommended that you record all your expenses with evidence to claim those expenses.