Contractors’ Questions: How to independently import Spanish tech products into the UK?

Contractor’s Question: I’m Spanish and about to start selling Spanish computer products from Spanish technology companies into the UK. I would like to start up as an independent contractor, and I don´t know if I need a special requirement due to me being Spanish.

Furthermore, a colleague told me that I am not supposed to pay taxes if my income is not over £12,500 but I find it a bit strange, because if that’s the case, how can I invoice my customers and suppliers?

For background, I am thinking about hiring an accountant, but I don´t know how much it could cost to me, and my budget is really tight. I’m hopeful this is the sort of small example of trading one could execute without an accountant. Any help would be really appreciated.

Expert’s Answer: Let’s start from the beginning. When setting up a business, be that in the EU or the UK, in the goods or the services sector, one thing is a quite important consideration before you commit yourself: the likelihood of success!

While we should be optimistic enough to venture into the entrepreneurial world, we should also not overlook making a long, cold, hard assessment of all the potential risks.

Go cautiously, but do enlist list accounting help

In your case, there are quite a few obvious ones. In fact, while we do not know the nature of the future imported goods from Spain, we can certainly advise that you should be cautious about investing a lot of money from the start.

That said, we would recommend you invest a minimal amount into getting some professional advice from a qualified UK accountant. No business can survive without proper accounting, and in your case, you need this extra professional help into choosing the legal form to trade, and to navigate the uncertainties you face.

Perhaps you can start as a self-employed sole trader -- so still independent as you want, and decide if you want to incorporate the business (to become a limited company) later on? This decision to ‘go Ltd’ ought to come up if / when you hit the 40% tax bracket. Before that, it is more or less equally advantageous to be a UK sole trader or a limited company.

Brexit (and duties) uncertainty

As to the particulars of your proposed trade, working with Spanish (EU) producers/ suppliers in the UK might prove challenging over the next few months. The UK will officially leave the EU on January 1st 2021. Therefore, we (and you!) can only speculate how imported goods will be treated. But it is highly probable that some customs duties will apply, although nobody knows how much this might be at the time of writing.

Regarding you being Spanish, if you have severed economic ties in Spain, then your tax residence there should end, and you would be subject to tax only on income that arises inside of Spain.

Your quick tax need-to-know

Moreover, once you have spent more than 183 days in a tax year in the UK (6th April to the following April 5th), you will be paying taxes in the UK on your worldwide income.

To summarise our answer, you need to:

i) Take professional accounting advice in the UK.
ii) Set up the business, bearing in mind the guidance herein.
iii) Follow closely the developments related to Brexit and any announcements affecting businesses like yours.

Finally, you mention that you do not pay tax in the UK unless income exceeds £12,500. The £12,500 you refer to is the personal ‘tax free’ allowance or nil rate band. But please note, income from £12,501 until £50,000 in the tax year is subject to a personal tax rate of 20%. After £50,001 you pay tax at 40% until £150,000 a year, when the tax rate is 45%. We wish you good luck with your new venture!

The expert was Nikolas Papageorgiou, EU country manager at international contract management company Access Financial.