Working for UK company - What is the best set up for tax?

[brianwoodwardnz]

Hello,

I have recently moved back to NZ from the UK and retained an online position with my UK company. I am now an NZ resident for tax purposes.

I suggested to my work that I work as a sole trading contractor in New Zealand and invoice them directly and they then pay into my UK bank account. I would then pay tax on that amount in New Zealand. They are concerned that HMRC will take the view that the should have been taking income tax before paying me the money. If I am a sole trading contractor then I thought my work wouldn't have to pay income tax before I receive it, is that right?

Also if anyone knows a better setup for tax purposes I would really like to hear it.

My wife was using a UK umbrella company while contracting in the UK which saved a lot on taxes. I could also do that, but then I assume I would also have to pay tax in NZ anyway.

Any help much appreciated. Brian

[chrisl34]

As a NZ tax resident, you will have to pay NZ tax on the income paid from the UK company unless you have been away from NZ for at least 10 years in which case certain offshore income is non-taxable for 4 years. However this 4 year tax exemption would not apply to your services income derived from the UK (but would for instance apply to any UK rents or dividends).

It is possible your income may also be taxable in the UK and tax should have been deducted there. However, the NZ/UK Double Tax Agreement would likely apply to mean that only NZ had the right to tax your income (Article 15 or 16).

If you are truly an employee of the UK company (under NZ employment law), then documenting the arrangement as a sole trader does not alter that. As an employee, the UK company would be liable to register in NZ as an employer and account for PAYE, Kiwisaver etc. Also, if you were an employee, the UK company could end up with a taxable presence in NZ through you and the UK company may have to pay tax in NZ on certain profits. The UK company may also have to register with the NZ Companies Office as an overseas company carrying on business here and file audited accounts annually (this rule is likely to be gone in a couple of years).

If you can truly act as a sole trader/contractor in your arrangements with the UK company, this is probably the most tax efficient for you. The umbrella company structure should increase the likelihood that you would be a contractor rather than an employee. You should not have to pay tax in the UK (relying on Article 15 of the DTA) although the UK company may still be required to deduct tax which you could then recover (you would need to take UK tax advice on this). As a contractor, you can also claim deductions for expenses. Even if you did end up paying some UK tax, you can generally claim a credit for that tax here in NZ against your NZ tax liability. If your turnover was over $60k, you would have to register for NZ GST but would be able to zero-rate your services (assuming the UK company is a non-resident of NZ i.e. not owned by you).

[edw123]

Third paragraph is essentially the issue; I found when I worked in the UK, we had an employee actually tax resident in Spain, but had been collecting UK PAYE/NIC; unfortunately the company would have had a liability under Spanish Tax Law to not only register/account for Spanish Taxation, but the companies profits would actually have been liable for tax under Spanish Taxation.

You can throw in the fact that even if the company chose to do this, to account for it (often through a third party tax advisor, e.g. PWC) would be enormously expensive. Company I worked for removed the individual immediately under compromise when this fact was uncovered.

As a sole trader registered in NZ and charging a UK company, if no employee/employer relationship exists, then you could invoice/pay through the company (unsure if this would cost the company under a various schedule, but cost would be minimal); as said you may well end up paying tax on your earnings in the UK, and then claiming a credit against this in NZ. However, you'd have to complete dual tax returns, which may well be messy and expensive to do if you incur advice.

Can only assume you are very senior or very valuable; the cost and hassle involved means your UK employer would be insane to do this unless you were very senior and irreplacable!

[dlf77]

Hi,

I'm in the same situation, i moved to Auckland 4 months ago and i'm currently discussing an opportunity with a UK based company. They would like to make me work from NZ on a IT/R&D project as a sole contractor with regular trips to the UK to keep in touch on the project (say 1m very 4m). I'm currently investigating the legal and tax issues and would be more than happy to get in touch with someone who has some experience in that regard,

I was thinking of getting in touch with a UK Accountancy firm so that i don't have to worry about the complexity of the paperwork too much,
But indeed i will have to fill both UK and NZ tax paperwork anyway...

Any advise or feedback would be very welcome,

Cheers

[chrisl34]

Hi,

I'm in the same situation, i moved to Auckland 4 months ago and i'm currently discussing an opportunity with a UK based company. They would like to make me work from NZ on a IT/R&D project as a sole contractor with regular trips to the UK to keep in touch on the project (say 1m very 4m). I'm currently investigating the legal and tax issues and would be more than happy to get in touch with someone who has some experience in that regard,

I was thinking of getting in touch with a UK Accountancy firm so that i don't have to worry about the complexity of the paperwork too much,
But indeed i will have to fill both UK and NZ tax paperwork anyway...

Any advise or feedback would be very welcome,

Cheers

Hi

I have some experience in this area and want to send you a private message but your settings do not allow private messages to be received. If you would like assistance, please enable private messages to be received and I will PM you.

[JandM]

As with all members when they first join, dlf77 can't send or receive PMs until they've made five posts on the forum.

[Tellan]

Hello Hello.

My situation is similar to what you have described, which I thought I could apply, until the fine print in the last line - (assuming the UK company is a non-resident of NZ i.e. not owned by you). What is the scenario here if I am the sole shareholder of the UK service related company, and it continues to operate offering services to UK companies, (services that are performed here in NZ)?

I understand dividends received 'shortly after arrival' in NZ are not taxable? Do you know what period is 'shortly?'. Is this the easiest way to access retained earnings held by the UK company?

[bartholemues]

Hello All.

Has anyone had any more recent experience with a situation like this please? My UK company would like to retain my services as a contractor to work on some on-going projects when I move home to New Zealand. I had assumed this would be a fairly straight forward arrangement, where they could pay my UK company and I would then pay myself for services rendered and pay income tax in New Zealand. However, it seems this may not be so simple.

Is there anyone here who has done this or could point me to a tax specialist who can assist with this please?