TC8474

I'm planning to move from the UK to Canada. I'm moving jobs shortly and will become an independent contractor in the UK for 6 months before my new "employer" supports me to move and work remotely in Canada.

I've been advised that tax wise the simplest thing to do is become an employee of an umbrella company who will then invoice my employer in the UK for my services and sort out my Canadian tax affairs.

I've been in touch with an umbrella company and they have quoted me 5.9 per cent as their fee and told me this is fixed and non-negotiable. Does anyone else use an umbrella company and if so what fee are you paying?

I'm happy to pay the going rate as I'm very keen to move. If that's 5.9 per cent then so be it. I just want to make sure I'm getting as good a rate as possible!

Thanks.

T

JonboyE

I am not sure what you mean by an umbrella company. Or why it wants to charge you 5.9%. Of what?

It is quite common for a Canadian resident to have a a Canadian corporation that bills a UK client. Equally, it is not necessary to incorporate unless there are personal liability issues, you will make more money that you need, or if your UK "employer" insists on it.

Siouxie

Why not just invoice them yourself as a freelance remote worker?

I work for a UK company remotely, invoice them monthly (I have a registered business as a self employed person but am not incorporated) and then pay my own taxes and CPP.

TC8474

Souxie,

Thanks for your post.

I had heard (maybe wrongly) that the Canadian tax authorities will insist on treating you as an employee if you tend to work for only one employer. What's been your experience? Does your employer just pay you gross and then you sort out all of the local taxes from there? How heavy is the admin burden in setting up and running an LLC and dealing with personal and corporate taxation?

I'd be more than happy to set up an LLC if it would save me 5.9 per cent of my income!

Thanks

T

TC8474

Souxie

Sorry just read your post again - ignore the LLC comments! Did they question your contractor status at all?

T

JonboyE

Er ... hello!

If your employer were Canadian it is possible they could deem you to be an employee. If they do they will collect taxes and CPP/EI contributions from the employer. You are not at risk. If the employer is in another country what are they to do? It is only likely to be an issue if you do not file and pay your personal taxes.

And I have to ask again, what is the 5.9% for? It sounds dodgy to me.

Siouxie

I have a legitimate business entity (company) who invoices the UK company for my hours as a freelance consultant/remote self-employed worker. I decide how many hours or days I work or if I work at all in any given month, I am not an employee with set hours or days and I do not get paid for vacations, illness or days off.

Additionally I undertake other work through my company (the creation of bespoke blueray/dvd photo and video presentations) which enables me to additionally show that I am not an employee, I am self employed. I pay taxes and CPP as a self employed person and submit the necessary forms and documentation to CRA.

To date I have not been questioned (but that doesn't mean I won't be in the future).

TC8474

Jonboye - I couldn't put my employer in the position where it might be liable for Canadian taxes. The. 5.9 per cent fee is a percentage of my income. There's nothing underhand about umbrella companies. They are widely used.

Siouxie - is your company incorporated in the UK or Canada? Looking at the CRA website I'd probably have to register for GST and charge 5 per cent extra on my fees. In reality I would have to bear the cost of this and mark down my invoices by the 5 per cent. If that's the case and the umbrella company doesn't have to charge sales taxes, then really their fee as it affects my pocket is only 0.9 percent which is pretty reasonable to avoid all that extra admin.

T

JonboyE

It is really not a great concern provided a) you file and pay your taxes and b) the UK company does not have a permanent establishment in Canada.

It is not a phrase I am familiar with. Is this a corporation that bills your employer for your services and then pays you net of their 5.9% commission? If so, I can see this will put a degree of separation between you and the UK employer. It will cost you around $1,500 a year to administer your own corporation.

You will have to register for GST if your annual sales exceed $30,000 but the rate for export sales is 0% so it is not going to affect your selling price.

Siouxie

My company is not incorporated; I am a sole trader (self employed).

As JonboyE mentioned, there is no GST chargeable for overseas sales.

dbd33

I've only come across them in Canada in the context of approved supplier lists, where an organisation will only use contractors supplied by firms on the list. What happens then is that a contractor negotiates with the organisation and then shops the contract around the approved suppliers. The supplier bills the client, the contractor bills the approved supplier. In that circumstance 5.9% (on a "you get paid when we get paid") basis seems like a bargain. We used to charge 8% on contracts with the feds and had people knocking the door down to make that deal. Few contractors have deep enough pockets to sustain such a contract though, they usually pack it in after a few months.

If the client is overseas and doesn't mind then just bill them yourself.

TC8474

Thanks everyone

T