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Freelance dev work for UK companies - how?

I'm a permanent employee in a company in London,  currently in my notice period to this employer.

I'll be spending the next 10 to 14 months in Argentina. During this period I'm planning to work as a freelance developer. I already have some contacts in London that will probably lead to freelance gigs while I'm there in Argentina. It's not confirmed yet, but there's a good chance.

All fine and beautiful, but the question is... How can this work in terms of taxes? I don't have any Ltd company. I contacted Parasol, an umbrella company, and they said they can't have me as a member because I'll be outside the UK for more than 90 days. Didn't know about that.

Doesn't make sense to be a permanent employee either - this is about temporary freelance gigs, working remotely.

So, how can a UK company legally pay for my work while I'm living abroad?

I appreciate any information on this...
Registration is futile Send private email
Wednesday, May 13, 2009
You could always just set up as a sole trader and bill your clients directly. I discussed several options with my accountant, for the amount of work I was planning on doing and the fact that 90% of IT contracts are now caught by IR-35 and you have to pay regular tax on them anyway the easiest option with least hassle was to just bill my clients directly as a sole trader.

All you have to do is notify HMRC that you are working for yourself, set up a business account (or a normal account) with your bank just to keep your business and personal finances separate and just give your accountant all the invoices and receipts you use and have them fill in your tax return at the end of the year.

I'm not really sure what benefit Umbrella companies give you as they are essentially a glorified accountant that take a % of all your earnings. Plus you end up having to wait for payments to get to them, then have them send the money to you so you could end up waiting twice as long to get paid. Setting up a Ltd company requires quite a bit more work and I'm not sure if you would need to be resident in the UK to do so but it does give you more protection I think.

I'm sure others far more experienced will have a better idea though :)
DP Send private email
Wednesday, May 13, 2009
Since you are outside the UK for > 1 year you can choose to be non-resident for UK tax, there is a form on the inland revenue site. You file a UK tax return showing zero income.
You then file a tax return in Argentina showing your foreign income - does Argentina taxes foreign income at a reasonable rate.
Assuming  you are working in Argentina - it's generally easiest to pay tax where you are living.

It shouldn't be a problem for you to work for a UK company as a freelancer and not be in the UK - the agency is probably just worried about extra paperwork.
Martin Send private email
Wednesday, May 13, 2009
DP: "...and the fact that 90% of IT contracts are now caught by IR-35..."

Is this really the case now? I've been out of contracting for a while, so I'm not up do date on how the IR35 fiasco is going.
Scorpio Send private email
Thursday, May 14, 2009
Obviously this hinges on the OP having the right to work in Argentina - you can't say 'I'm working for people in the UK so I'm not really employed in Argentina' and get around their work restrictions that way. As a previous poster said, it's better to be non-resident for UK tax purposes for the year and pay no UK tax if you can - it may or may not be possible, though, if the income is effectively earned in the UK. Still, given the number of tax loopholes available to the wealthy, a good accountant should be able to find you a way of paying as little as possible to Mr Darling.

The information available on-line about Argentine tax rates is somewhat contradictory, but several sources seem to agree that it's a progressive system between 9% and 35%. One site suggested that non-residents pay a 21% witholding tax on local Argentine income only, another suggests a 35% witholding tax on non-Argentine income. You should probably contact the Argentine embassy for advice, but it looks like you'd have to do a self-assessment at the end of the year and pay standard income tax on whatever you make while you're there if you're not paying UK income tax.

Interestingly, if you live there for less than six months in a tax year and your income is non-domestic and solely from overseas, you'd pay no Argentinian income tax at all, it seems.

At all costs you want to avoid getting caught in the double-tax trap, paying income tax in both countries on the same income, which given some countries' rather unpleasant tax laws can actually happen.

Also, you should note that not all UK companies are comfortable dealing with sole traders / freelance programmers, and insist on having a contract with a limited company (yours or an umbrella) for the legal guarantees and options it gives them. Although if you're cheap enough and have a good reputation, you'll find customers I'm sure.

Good luck!
.NET Guy Send private email
Thursday, May 14, 2009
.NET Guy, my wife is from Argentina that's why I'll spend some time there. I think I won't have problems in terms of work permission.

Anyway I'll review my options and probably stay as a sole trader/free lancer.

Replies were really helpful, thanks again!
Registration is futile Send private email
Thursday, May 14, 2009
Scorpio: Well, 90% is probably a bit of an exaggeration but from my recent contracts I have been caught by IR35 because I was not able to set my own hours and have worked on more than one project. In most contracts you have to work within the companies core hours and that seems to be one of the main catch areas of IR35, not being able to pick and choose your own hours. You also have to be very specific when the contract is drawn up that you are being hired for one specific project, again companies don't really like this as they cant ask you to help with other work then.

Freelance work is much better (if you can get it) as you are usually hired on a project by project basis and generally work wherever (from home?) and whenever. Only going into offices when you need to have meetings etc.

My current contract is up in 2 weeks so I might try and see if I can get some freelance work for a while. The trouble is Im just starting out so I don't have many contacts to "tap into" at the moment.

As far as going with Ltd or Umbrella, I guess it depends on the type of companies you work for. If you were working for a big company then you probably would need to be a Ltd company, working for "new media" agencies (I hate that term!) you can probably get away with being a sole trader.
DP Send private email
Thursday, May 14, 2009
Thanks for the follow-up.

I've been doing what you describe as freelance work for a while now, as well as working on my own µISV projects, so IR35 doesn't apply.

I was thinking of doing a couple of short-term contracts, but if IR35 applied it wouldn't be worthwhile. I don't fancy paying that much tax ;-)
Scorpio Send private email
Friday, May 15, 2009
Of course being on another continent is also a good way to get around IR35 - they can hardly claim you are an employee.
Martin Send private email
Friday, May 15, 2009
Being on another continent wouldn't suffice in its own right - the IR could simply claim that you were an employee, but telecommuting. I'd be inclined to agree with them!

You'd need (IMO - IANAA) some other justification, like a fixed price contract, ability to substitute another worker, freedom to set your own hours and the responsibility to provide your own equipment, freedom to work for other clients.....
Ben Blaukopf Send private email
Tuesday, May 19, 2009

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