Contractors' Questions: How to keep my Italian clients while relocating to the UK for consulting?

Contractor’s Question: I am a freelance consultant based in Italy, paying taxes in Italy, with a portfolio of Italian clients.

I am hoping to relocate to the UK from Italy and set up a ‘Ltd,’ but am unsure if it is possible for me to continue with my work and client-type, while I wait to acquire clients in the UK?

I gather that if I cancel my VAT registration in Italy and register with HMRC I can work in the UK, then ask for ‘pre-settled’ status after a while. Am I correct and is this the best way to go about things while factoring in covid-19 delays and restrictions?

Expert’s Answer: Since you have a VAT registration in Italy, you may invoice both your existing Italian clients and your potential UK clients using your Italian VAT number, while you are still in Italy. You will not charge your other EU/EEA clients for VAT on your services under the Reverse Charges provisions. They will, however, have to account for this VAT in their tax returns.

Once you move to the UK, you may open a UK limited company, which you may then use to invoice any clients anywhere you wish (Italy, the UK, or even France, for example). You will later pay company taxes in the UK, salary taxes in the UK and dividend taxes in Italy or the UK, depending on when or if you withdraw any dividends from your UK limited company.

Shifting (tax) status

After 183 days of continuous staying in the UK, you will become a tax resident which means your worldwide income is subject to UK tax.

At that point, you should not have any tax obligations in Italy anymore -- unless you have income arising there, provided that you have appropriately informed the Italian tax authorities about your new residence. The Italian authorities may request a UK tax registration evidence from HMRC, which you will have to obtain and provide to them.

As to ‘pre-settled status,’ it is for EU citizens and family who have not lived in the UK for five years on December 31st 2020. They can continue to live in Britain until they reach the five years, then apply to change their ‘pre-settled’ to ‘settled’ status for no fee. They do still need to apply for pre-settled status in order to be eligible for settled status.

Scheme small print, and covid considerations

Both schemes include EU citizens’ family members, including family members who join EU citizens in the UK before the end of 2020. They also cover family who join after that date, if the EU citizen that the family member is joining was already resident in the UK, and they had a relationship before this date which continues. Both schemes also cover future children of those with settled or pre-settled status.

Once a person gets ‘settled’ status, they can be away from the UK for a total of five consecutive years. After this, the status will lapse, so it’s something that needs to be maintained.

And if Brexit wasn’t enough to navigate, you also face Covid-19! Fortunately, despite some travel-related restrictions remaining for people who try to enter Italy, it is now at least possible to travel to the UK from Italy. However, it is still highly recommended to check the ‘travel corridors’ updates before you plan and make your journey.

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