Contractors' Questions: As COVID-19 took my job, can I take a software job in France?

Contractor’s Question: As a French citizen who has been living and paying tax in the UK for almost five years, I’ve suddenly found myself laid off due to redundancies triggered by the impact of coronavirus on my employer.

My plan was to go back to France in July 2020. But since being made unemployed, I’ve found a software engineering job near Paris and they want me to start ASAP! The problem is that I can`t be employed in France without living there and as said, I planned to move there no sooner than 3-4 months’ time.

Is it best if I sign up as freelance sole trader for the 3-4 month assignment so, technically, I can start immediately and invoice monthly? I’ve got a bank account in France, partly to prevent exchange fees; so would it be possible to take payment into my French bank account?

As this is only 3-4 months’ working activity, what are the tax implications? Or is just a case of registering as self-employed on the HMRC website? Thanks for some guidance.
 

Expert’s Answer: Firstly, it should be pointed out that while the covid-19 outbreak in France has prompted the French government to extend the country’s lockdown until May 11th, the border between the UK and France is not closed. That said, a reduced transportation service is operating and it is advised that all “non-essential” journeys are avoided.

As a result, you should consider (as you appear to be doing) that you can actually work in the UK, and still be engaged by your French client. If you were to become an employee, you would be obliged to pay social security contributions and income tax in the UK.

Meeting their needs, and yours

Alternatively, but to still carry out the work in the UK, you can certainly register as a sole trader or set up a UK limited company, in order to meet the client’s preference that you start working ASAP. Then, you would invoice your French client and get paid into your account of choice. As a sole trader or a limited company, invoices can be paid to a bank in your name (personally if you’re a sole trader), or to your company’s name (if you’re a limited company).

As to your query about using a French bank account, you could receive payments on any EU account, meaning the bank transfer fees would be avoided. Yet taxes or social contributions will have to be paid regardless, so any savings will only amount to bank transfer fees/ currency exchange risk.

Factor in delays due to coronavirus

To become a sole trader or limited company, you need to complete a registration process with HMRC (and Companies House if become a ‘Ltd’). Ordinarily, this process takes only a couple of working days, but you should be prepared for a delay given that the pandemic and guidance in response to it, is affecting a wide range of services and processes.

While you are in the UK, income taxes will be paid in the UK. If you are a sole trader, there is differentiation between personal/ corporate income, as there is no corporation tax to pay. If you set up a limited company, then there is corporate income and personal income.

Once you move to France (let’s say your July plan is not affected by the pandemic), and you start working there, income taxes will be paid in France. However, you will remain UK tax resident until you have left the UK for a full tax year for the purposes of working. You should submit a form P85 to inform HMRC of your intention to leave the UK.

Confusion, contributing and compliance

This is often a point of confusion. But to reiterate, taxes must be paid in the country of work, unless you were to become a ‘posted employee’ – a staff member who is posted abroad for less than 183 days in a tax year. In principle, even a week’s work in France should be taxed in France, although it would be technically hard to follow for the tax authorities. Four months, however, as you envisage, are totally taxable -- in France from the moment you start working in the country, should you start working in-country as opposed to from the UK.

Finally, please note that in either case (working from the UK or working in France), you will be paying National Insurance Contributions and you will pay your taxes when the next tax assessment takes place. As a result, you need to make sure that you have saved enough funds for these payments. You would also need qualified accounting advice and support in order to maximise your net income in a compliant way.

The expert was Nikolas Papageorgiou, EU country manager at overseas contracting specialists Access Financial.