Roberto3000

Thanks Sioxsie and Seaeman - really great to get your perspective on this. Seems we are ploughing fairly lonely furrows on this one.

So I've heard back from my agent. The client wants me to work through an intermediary umbrella company. So self employed isn't an option. I will be employed directly by the umbrella. The umbrella wants to pay me the gross amount and seems happy to do it this way, and i then report my taxes to Canada. I complete my tax return at the end of the year and pay what the CRA want. Presumably income tax, EI, but not CPP. Maybe provincial health thing as well? UK wouldn't get anything under this route.

From my point of view, does there seem to be any issues here? Also, would doing the one tax return be fine or am I expected to report estimated income on a more regular basis through the year?

Thanks again!!

seseman

oh that's good that the umbrella company is happy to pay the gross. In that case, I believe you just report as worldwide income and pay Canadian tax. I think CPP is compulsory so you need to pay that as well unless you can show evidence of having contributed to another regulated pensions in the UK which I wouldn't bother with and sounds complicated. There is a upper limit to CPP and I think it is about $5790 or so per year.

Use one of those calculators to see what you could potentially owe in tax based on estimated annual income. I believe Canadian tax is filed yearly. The tax year is 1JAN-31DEC with all due payments to be made by end of April following year.
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Siouxie

As previously mentioned - on earned income, you will be required to pay Tax and CPP -- EI is only a requirement when you are employed by a company IN Canada - if you are self employed it's optional. https://turbotax.intuit.ca/tips/cpp-...canadians-8648

You could be self employed and invoice the Umbrella company... they would be your clients. I don't know if paying you gross without any deductions in the UK is legal if you are employed by the umbrella company... you might want to read this article.. https://www.litrg.org.uk/tax-guides/...s-my-position- and https://www.contractorumbrella.com/r...nal-insurance/ and https://www.contracteye.co.uk/umbrel...ic-costs.shtml

I think these threads should be of more help to you
Working remotely for UK company from Canada
IT contracting in Canada > Umbrella company required

Calling dbd33 / Atlantic Xpat for some hands on experienced advice!

Roberto3000

Thanks chaps.

On the question of whether the umbrella company is behaving legally by paying me the gross amount - could it be that they dodge this issue since I am not resident in the UK? In relation to Canada, they are safe from enforcement. In any case, if this doesn't affect me and is their problem then I'm happy to do as they've suggested, which is to take the gross.

Do I have to report to CRA quarterly or can I just do the one tax return at the end of the year? On EI, I just won't pay it and then I presumably needn't worry about employers/employees contributions.

I have queried whether self employed route possible but i don't think so. I'm also weary of getting sucked into the question of whether I am "self employed" or not (the Canadian version of IR35). In the UK, the contract in question is within IR35 usually. If being employed in the UK, taking the gross, and paying CRA is the easiest route then I'd take that.

seseman

I dont think you need to do any reporting other than filing one tax return at the end of the year. You cant opt out of EI if you are filing worldwide income. You would be classed as employed. The only people who can opt out of EI are self employed people. I wouldnt dismiss the umbrella company issue...HMRC would come after you if you are found to have dodged tax one way or the other be it your fault or the umbrella company's so please ask them the right questions about compulsory deductions. Any thing they take out should be claimable as credit when filing return in Canada.

Siouxie

Please read the links given.

Siouxie

The OP would not be employed by a Canadian company, nor self employed (which is the relevant part when it comes to EI) - it's only required on earned income with a Canadian employer... Foreign Income earned as an employee of a foreign (overseas) company isn't insurable, as far as I am aware.
Agreed with everything else you said

Taxes: https://www.canada.ca/en/revenue-age...nt-income.html

Self employed can opt to pay EI - https://www.canada.ca/en/services/be...d-workers.html

seseman

Thank you for that correction and important piece of information. I didnt know EI wasnt deductible from worldwide income. Noted.

Roberto3000

I am a little suspicious about the umbrella company's advice here. By paying me gross, they basically get paid (by me) for doing virtually nothing (a payslip with a load of zeros on it and a bank transfer) and I am the one left holding all the cash if something goes wrong later. CRA can't hurt them and they might simply say to HMRC that I was never really an employee of theirs. CRA get all confused and cry "you're self employed but you're not self employed! Rules x y and z need to be complied with!!" Followed by a load of stress, legal advice, and BS.

Maybe the best route here is a canadian umbrella co or PEO who my agency pays the money to and who then does the Canadian stuff. Any thoughts/suggestions? Google doesn't reveal much and maybe it isn't the same thing as in the UK. No doubt a rip off.

Or go with the self employed option and hope CRA don't call me out for working for one client. Assuming my client will allow it.

Or, possibly best, just instruct UK umbrella to pay UK tax and I'll declare world income and taxes on canadian return. CRA will lose out on a load of tax but I don't see how i can help them without the risk that they make my life difficult later.

Does the last option work?

Siouxie

The umbrella company either employ you and make deductions, or they could become your 'client' and you invoice them (presuming you want to be paid 'gross') - I'm sure they will want their cut somewhere though. You can get a Transferwise Borderless Account for money to be paid into (i.e. a 'virtual UK account') - and then you can transfer the funds to your Canada bank account when you want to - with no wire transfer fees to pay. https://transferwise.com/ca/borderless/

There are more than a few people in Canada who have worked as 'freelance contractors' for agencies in the UK, remotely - (including me)... it should make little different to the Agency in the UK to pay your invoice instead of the umbrella company, if you give them a virtual uk bank account to pay into. Perhaps ask again..

I would recommend you become a self employed freelance contract worker - then invoice the agency or the umbrella company, do your own taxes etc., in Canada - You can always place an advert somewhere (kijiji is free) or even make a free website where you can 'advertise' for 'clients' - or register with one of the 'remote work' sites - this is your first contract, you are a newcomer - you won't be expected to have many clients.. give yourself some breathing space.. Self employed here is different to the UK.. they would be more concerned if you were working for one client only in Canada - but you have overseas client(s), so not such a big deal.

Your last option - you will need to fill out specific forms to show taxes paid so that you can take advantage of the dual taxation treaty, otherwise you could end up paying taxes twice! Information in the wiki links

Roberto3000

Ok, you are persuading me...

In order to be self employed do i need to register? Do I need to create a company name? Do I need a business licence? I am planning to work from a rented office.

Are the tax return requirements straight fwd, or will I need an accountant? Presumably I just keep a record of invoices and receipts to the client? And I can be paid into my UK bank account? Also, just one tax return and payment of all that is owed?

Siouxie

If you trade under your own name, then no business name is usually required - nor a company name as you won't be incorporating. A Business License will depend on the Province / City you reside in, generally speaking. Most Cities / Provinces have 'small business' websites with all the info you will need - if you can say where you are, I'll dig it out for you.

Unless absolutely necessary I wouldn't rent an office to start with - unnecessary expense and the potential to have to have a higher insurance. If you were working from 1 room at home then you could deduct a percentage of many of the outgoings of the household for 'use of home office' (rent / mortgage interest; utilities; (heat/water/electicity); internet costs; telephone costs; and the usual 'office supplies, capital purchases etc. More info available from > https://www.canada.ca/en/revenue-age...-expenses.html

There's free software you can use for both accounting and tax preparation, (approved), it's not that complex. You will need to keep a record of invoices, conversion amount received, notations of expenses. You can be paid into your UK bank account, however, if it's a normal UK bank account you will be charged at both ends for the wire transfer - Canada side it's usually around $17 per transfer and I believe in the UK it's around £25. (keep a note of the amounts - 'bank charges' on your expenses). You may find it easier and cheaper to open a transferwise borderless account, you have control over when you want to transfer the money to Canada (think 'good exchange rate days / bad exchange rate days) - I found them to give a better exchange rate than some banks; you won't get charged for the receipt of the funds in your Canadian bank account as it's not a wire transfer.

You will need to pay CPP as well as taxes, you pay both your contribution and what would be the employer contribution, but you get a credit for the employer half on your taxes.
Depending on your level of income you may need to register for HST/GST (overseas clients are invoiced at 0%).. but more info on the Revenue Canada website..

seseman

Roberto3000 I think Siouxie has given you the best advice. Self employment will benefit you greatly. You get to save on tax through expenses and you are lucky to have a flexible client. It seems difficult or intimidating but do some reading on it and you will see you can do it. All the best.

christmasoompa

Looks like you've been given lots of good advice, but again I really don't think you can choose to pay tax in the UK anyway as you won't be tax resident there. You can't just pick a country to pay tax in if you earn/live somewhere else - if you could, everybody would pick Monaco!

Roberto3000

Thanks all. This has been extremely helpful - hats off to Sioxie in particular.