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Tax for UK citizen on 6 month contract

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mateyboy
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Tax for UK citizen on 6 month contract

Postby mateyboy » Wed, 12 May 2010 6:17 pm

Hi quick point to say how useful this forum is, I've been able to answer loads of questions from the posts I've searched.

However this is a bit complex and I've not seen it answered.

I am currently contracting in the UK, through my own limited company. I have a contract to work in Singapore for 6 months, possibly becoming permanent.

I am concerned if it does stop at 6 months then I will be taxed on that income when I return to the UK at a much higher rate but the money offered is based upon Singapore lower tax regime.

I have a few questions:
1. Does anyone have experience of working for a period like this outside of UK and how you can be sure UK won't impose tax upon your return
2. Do contractors in Singapore also work through limited companies in the same way as the UK?
3. Do you know of any tax specialists who I could approcah for (if necessary paid) advice?

Thanks very much in advance

Leo23
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Postby Leo23 » Thu, 13 May 2010 3:41 am

Hi mateyboy,
I am in the same exact predicament as you are. I run a UK limited company and have been approached for a contract job in Singapore.

After going through the interview process, and from speaking with a UK tax attorney, it has been decided that the best approach would be for me to contract directly to the client in Singapore and not have my limited company involved. My contract could have been six months or 1 year. I chose the 1 year option, also with a view to perm. Rates are much lower than the UK and having to pay corporate tax in the UK would make it very difficult to be profitable. VAT could be excluded, since it could not be collected...

UK tax is based on residency status. Residency test, from what I understand, is if you are away for an entire tax year, then you would not be subject to having to pay any UK tax. To avoid any UK tax, at this point, you would need to be in Singapore, or abroad outside the UK, until April 2012.

Since the 2010-2011 tax year is already underway, if you came back to the UK after 6 months, or before April 2012, you would have to top-up the tax paid in Singapore to what would have been charged on the same income in the UK. If your six month contract is worth $100k then you would owe $7,100 to IRAS in Singapore. Generally, you can deduct rent/utils/living expenses from your income to calculate your UK tax liability. If it comes out to less than your Singapore amount, then you owe nothing. If it is more than your Singapore tax paid, then you need to pay the difference. For example, if your rent is $3k/month and other associated expenses (electricity, phone, water, tv license, etc.) are another $1k/month for six months you can deduct $24k from your UK taxable income. For $76k (£37k), you would owe roughly £2,400 as the total tax bill would be roughly £5,800 and you've already paid £3,400 equivalent to Singapore...Best to speak to an attorney though for a more thorough view...

Are you a member of PCG? You can look on that website to find some information around tax attorneys and who to contact.

As for setting up a similar situation once in Singapore, perhaps others on here can assist with that. It could be an option but could also take many months to register the company, get it approved, get the necessary work permit for yourself, etc. and you run the risk of the company being rejected. I think contracting directly to the client with the view to perm may be the best option...

mateyboy
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Postby mateyboy » Thu, 13 May 2010 6:30 pm

Thanks Leo that's great information. I've been doing some further research myself and that is consistent with what you said, but I wasn't aware I could offset cost of rental overseas etc from the income so that's great to know.

It does seem that if it only works out as a 6 month contract then I'm screwed as far as UK tax, and if I end up staying until April 2012 it will be fine, although I'm not clear on what happens between now and then, if you leave permanently then presumably you stop paying tax in the UK until you come back (if you come back).

Thanks again.

Leo23
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Postby Leo23 » Tue, 18 May 2010 3:13 am

If you leave and you know you will be away permanently, then you fill out a P85 at some time after you have left - not exactly sure when you need to do it by - which indicates to HMRC your status so that they have a record of your intentions and fact you are out of the country for work and don't tag you as someone who has failed to file a Self-Assessment and come looking for you...

manutdfan
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Postby manutdfan » Tue, 18 May 2010 4:17 pm

I spoke directly to HMRC before leaving - I don't think it's neccessarily as tied to the tax year.

I'm planning to be outside the UK for at least one year - they told me to fill in a P85. Although I'm currently still paid through my UK company, I have an "NT" tax code which means I don't pay tax. As far as they are concerned, this is effective from the day I flew to Singapore.

NI however is different - you do have to continue paying that for at least one year after leacing the UK *if* you are paid by a UK company in the UK.

There is a double taxation treaty in place between Singapore and the UK - as I understand if you pay income tax on your Singapore income (which you will have to as you will be on an EP or something similar) then you may be exempt from paying UK tax on that income in any case. As pointed out, if you're not because you've only been in the Singapore for six months, then you can offset most of what you spend in Singapore as a business expense anyway, which will help reduce the expense.

If you're a limited company - surely it doesn't matter as much as because you pay dividend tax rather than income tax?

mateyboy
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Postby mateyboy » Thu, 20 May 2010 4:52 pm

Hi thanks for the further info. The company I will be working for can't work with me as a limited co so I'm going to have to be on the payroll otherwise this wouldn't be an issue.

tbentley
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question

Postby tbentley » Thu, 24 Apr 2014 11:11 am

Gents. Really interesting

Out of interest, does anyone know the outcome of this situation how you would be taxed...

You leave the UK January 1st 2014 and begin full time employment in Singapore. Let's say for some reason have to leave and you go back November let's say. So you have completed 187 days to be considered a tax resident in Singapore, yet you have not met the criteria in the UK to be considered a non-resident.

Ideally, I would presume you would pay the tax you owe to Singapore under the double taxation agreement - head back to the UK and declare to HMRC and then start paying tax on any other income your receive for that year.

Or does Double Taxation only count if you have worked abroad for a full tax year (April to April)

Would really appreciate some ideas/guidance as I would like to know just in case something was to happen here.


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