clarerowlands

I'm an Australian working in London, and in November I'll be moving back home - but continuing to work for my current UK employer remotely.

That I'll be working for them has been agreed, but there has been no talk as yet about whether I will be a contractor invoicing them, or stay as a fulltime employee. Does anyone have any advice for me here so I can make the right decisions when clarifying the situation?

THANKYOU!

Clare

Zenshin

Hi I am in a similar situation to yourself. I am an Aussie who runs my own limited company in the UK and I draw my income from it. I have had numerous talks with accountants and Inland Revenue since I am planning my move back in a few weeks and will continue to work for my company while in Australia. This is what I have gathered so far.

When leaving the UK you need to advise Inland Revenue that you will no longer be a resident for tax purposes as you will be living in Australia. You can also get an exemption from NI if you have no plans to return here to live and don't care to receive a UK pension. I believe you can get your income with no tax or NI taken out. Then you just report all your income to the ATO who will then work out the tax, medicare levy etc on your worldwide income. If you decide to still have tax taken out in the UK then you would get a tax credit for this and it would come off your Australian tax bill. Not sure if it would work out more tax efficient for you to remain employed or to contract yourself to the company. If you speak to an accountant knowledgeable in both tax systems they should be able to work out the best for you. Once you step foot back in Australia to live as an Australian citizen you will have to report all earnings to the ATO.

If anyone has discovered anything different to this I would love to know as I have found trying to decipher the tax rules etc a pain in the butt.

Daydreamer123

I am in a similar position. I work as a full time employee of a UK company with no presence here in Aus - except for me.

It sounds pretty easy to do, but in reality its quite difficult. If I was to do it again, I would try and work as a contractor with a contracting agent to sort out tax, super etc.

But PM me if you need some advice, I have been doing it for a year now, so I think I have most things sorted out, but HMRC owes me loads of money. I have been paying tax twice, and have been trying to get my UK tax back since April

I didnt know I was going to be working for them when I came over here, so if you know you are, try and sort out with HMRC to get yourself given an NT tax code before you leave!!

Daydreamer123

Oh yes, and speak to a good tax guy over here as soon as you can!

I do actually earn a fair whack of interest on my tax, as I keep it back myself. I paid a lump sum for the whole of last year, but now I am going on to a quarterly system so I wont get as much interest this year.

Also, finding a super that takes overseas payments is tough - PM me and I will let you know who I use. They were the only one that my accountant could find to do it!

ozhappy981

Do what Zenshin said:

Tell the UK Inland Revenue that you are leaving the UK permanently. If you are currently an employee, then you use form P85 to do this:
http://www.hmrc.gov.uk/cnr/p85.pdf

When you are in Oz, the UK company then pay you as a foreign contractor. This works out great for them as they do not have to pay UK employer NI contributions for you. But they will have to pay 9% Australian super contributions for you (that's still cheaper for them.) They have to pay super for you, because you only work for them, and as far as the super regulations are concerned you do not count as a "contractor". So, you join a super fund when you are here, and your employer pays 9% of your salary into your account with the super fund (not a problem to do from overseas).

You say you are an Australian, so you should already have a tax file number. When you get back to Oz, on the ATO website you get yourself also an ABN number (takes 10 minutes). You then send the UK company a monthly "invoice" (or whatever timeframe you agree with your employer) and they pay you.

At tax time in Oz, you can get a tax agent to do your tax return or you can do it yourself through e-Tax (free ATO's electronic tax return lodgement service).

You put your income from the UK company and any deductions you want to claim into section 14 (as "Personal Services Income") of the tax return.

You get the same rules for taxable deductions as an employee. And you will pay the same amount of tax as if you were an employee (as an employee you'd put your salary income under Item 1 of the tax return and deductions into the relevant D-sections, as a contractor you put everything under Item 14; there is no difference to the final outcome).

If at some point you perhaps start contracting for several employers, the tax treatment will get different (and once you start contracting for several employers, they no longer have to pay super for you). But as long as you just work for that one UK company, it all will be as outlined above.

It may sound a bit much to take in all at once, but it will become clearer once you are here and get into the system.

The main thing is to get the initial set-up right (the rest will simply flow through).

So, make sure you use that form P85 when you leave the UK!

You do not want to be in a position where you pay tax in the UK and in Oz. It'll get terribly messy and is likely to leave you worse off (for starters, there are virtually no tax deductions to claim in the UK, whereas in Oz there are loads).