Contractors' Questions: Where to pay tax while on UK-France project?

Contractor’s Question: As a limited company contractor in the UK, I’ve read that when contracting overseas the organisation that benefits from the product of my company’s work is considered the employer. I’ve also read up on the 183-day rule and the need to register my ‘Ltd’ if I were to contact in France.

But what if I began contracting for the UK outfit in a senior leadership role to help build a European hub? I’m a UK resident but a 12-18-month contract requires me to travel regularly to France to set up a management team on a new site which will be their European hub.

So if I’ll spend a lot of time at the French site (but less than 183 days) while working for the UK outfit, which would be deemed to benefit from the product of my work? Where would my tax liability be? As before this project, after it I’ll still be with this UK client via my PSC.

Expert’s Answer: Before addressing your interesting situation, please note that the guidance I’m going to provide is based solely on the elements provided, and that you should always seek personalised and formal advice from a tax professional before proceeding.

Your question very usefully illustrates the boundaries of the limited company model and its use when working outside the UK. Before addressing your queries, I’ll recap the information you provided that is pertinent to my response.

You are effectively working full-time for a UK-based client, invoicing them through a UK limited company. This UK client has asked that you spend a significant amount of time providing assistance in their development of a French operation, with substantial time spent in France (though less than 183 days in any 12-month period). Finally, it is clear that you have been providing services to this client in the UK before the beginning of this project and it can be reasonable expected that you would continue doing so afterwards.

In my view, the tax liability would remain solely in the UK in these circumstances, since it is clear that the project in France is of limited duration; is not full-time, and is for the benefit of a UK company with whom you are usually engaged.

To be on the safe side and to reinforce this argument, I would suggest that you seek to ensure that no more than 50% of your working time is spent in France. I also suggest that you don’t otherwise engage personally with the French tax authorities, for example, by buying a property in France, for the duration of the project.

Again though, I strongly suggest that you seek advice from a tax specialist who is fully aware of your personal and professional circumstances. But it strikes me that continuing to bill as you are at present will not pose any major difficulties.

The expert was Matt Walters, head of operations at international tax and employment specialists Capital Consulting. 

Editor’s Note: Related Reading –

Contractors’ Questions: Can I claim travel expenses from home in France to the UK?

IT contracting in France – Living & Working

Contractors’ Questions: Can my ‘Ltd’ supply the client at home & abroad?