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From the 6th April, HMRC are introducing legislation to tackle overseas businesses (including umbrella companies) that are paying neither class 1 nor class 2 National Insurance and in addition are not deducting tax appropriately from the pay of temporary workers. In such a scenario where the direct employer has not paid, the tax charge will be moved to an onshore engager of labour.

What is the Objective?

In the Chancellor’s Autumn Statement in December 2013, he announced the Government's intention to eliminate the problem of false self-employment through intermediaries.

What is the Objective?

Many Danish businesses hire foreign labour but Danish tax is rarely withheld from the payment. The reason is that labour in most cases is hired through foreign businesses who often also receive the payment.

Such agreements are often overruled by the Danish tax authorities on the grounds that the agreement constitutes hiring-out of labour and that the Danish business has hired the foreign employees. This may potentially lead to considerable tax claims against the Danish business.

Recruitment agencies who supply contractors to no income tax countries (e.g. Dubai, Abu Dhabi or Saudi Arabia) or to low income tax countries (e.g. many countries in South East Asia or perhaps Russia) often sell the deal to candidates on the basis of the tax free income or low tax income that they can generate if they work there.

The UK Government has yesterday agreed with France, Germany, Italy and Spain to develop and pilot multilateral tax information exchange. Under the agreement, a wide range of financial information will be automatically exchanged between the five countries. This will help catch and deter tax evaders as well as provide a template for wider multilateral automatic tax information exchange.

If most of your business is in The UK or Europe, you may get a nasty surprise if you wander carelessly outside your comfort zone and start doing business for example in Asia or the Middle East. This nasty surprise is called withholding tax. This is a tax that clients are obliged to withhold and pay over to their own national Tax Authority if they are making payments for technical or consultancy services to foreign suppliers. The nature of the tax can vary from country to country and from circumstance to circumstance.

Many UK citizens living overseas could find themselves being chased by authorities for backdated tax following the latest development in the UK's most high-profile residence case. The repercussions of this case can have a significant impact on the lifestyles of expatriate contractors (many of whom retain close links to The UK and return regularly for weekends and holidays).

The 30% expatriate tax facility has for many years been the main motivating factor in inducing foreign nationals to accept contracts in The Netherlands. In its absence, the tax and social security costs of working in The Netherlands would in most cases be prohibitive. This is why any changes to the rules surrounding the eligibility criteria for the 30% ruling are of crucial importance to any agency doing business in The Netherlands.

Benjamin Franklin said that the only certainties in life are death and taxes. Any Compliance Manager in a UK based Recruitment Agency will tell you that as they go to work each morning, there is one more certainty: they will be asked by a sales consultant what do they say to a contractor who wants to work in France/Germany/Belgium using his own UK Limited Company. The number of variations and angles on this particular theme seem to be almost infinite.

The standard objections that seem to come back from contractors who do not initially get their own way on this matter tend to be:

One of the most striking aspects of the international contract industry is the degree of confusion concerning the 183 day rule. This confusion spans agencies, contractors and even solution providers (who should know better but frankly often do not). The basic problem is that sales consultants at recruitment agencies are not tax experts and were never meant to be and therefore they find it difficult to handle objections from contractors who quote the 183 day rule to justify the way they want to work. My response to this is that sales consultants should not need to be tax experts.


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