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Invoicing your own UK Ltd co as Autonomo?

Invoicing your own UK Ltd co as Autonomo?

Old Nov 26th 2020, 6:22 am
  #16  
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Default Re: Invoicing your own UK Ltd co as Autonomo?

I think the UK accountant is correct, as the problems is that directors of a UK company are not allowed to invoice the company for their work, they have to get paid by salary.
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Old Nov 26th 2020, 9:14 am
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Originally Posted by quixote View Post
If your company is treated as non-resident then as far as I can understand it, it's subject to Spanish reporting obligations (quarterly or monthly accounts) and will then be subject to corporation tax on Spanish operations -- how does one apportion activities between UK & Spain?! Then it looks as though if you want to send money back from your de facto Spanish operation to your UK co so you can pay yourself, you will be taxed again through a withholding tax -- I think that was 19% if I remember correctly. Perhaps you could get out of your co being taxed again in the UK for corp tax by invoking the treaty to avoid double taxation, but I'm not sure. At first I thought that having directors in the UK and most activities in the UK would be enough to avoid Spanish obligations -- someone suggested that on another forum somewhere -- but it looks to me now that if any effective control is exercised in Spain then the activity it's associated with is taxable in Spain.
OK - update on this, from further research, it seems that the things I was reading were about the default situation in which there is no tax treaty. However, there is one between UK and Spain. It looks as though a branch (i.e. working through an appointed representative in Spain, who could be the owner/director, rather than a separate subsidiary company) can send money back to UK HQ without tax and pays Spanish corporation tax only on income resulting from activities in Spain, while losses can be repatriated and offset against turnover in the UK. So the director could work in Spain for the company through the branch, be salaried in Spain (not autonomo) and also be salaried in the UK for any work actually carried out in the UK, paying personal tax on UK and Spanish salaries only in Spain.

Any views on this. Sorry for hijacking the thread, hopefully this discussion is also relevant for the OP.

I know this is eventually something that will have to be sorted out by a professional, probably at great expense, and we wouldn't consider winging it, but I think it's essential to understand the basics, especially in a situation in which advice is often contradictory.
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Old Nov 26th 2020, 9:42 am
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Default Re: Invoicing your own UK Ltd co as Autonomo?

First you need to look at Spanish corporate residency tax laws which will most probably confirm that the company is tax resident in Spain (when managed from Spain). Then you can look in the tax treaty and see if the tax treaty will decide where the company should be tax resident when it's tax resident in both the UK and Spain.

You fill probably find that it says that the company should only be considered resident where it's managed and controlled, which in this case would be Spain. You can inform HMRC about this and you no longer have to file taxes with HMRC when the company is "treaty non resident" in the UK.
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Old Nov 26th 2020, 10:36 am
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Originally Posted by stepen View Post
I think the UK accountant is correct, as the problems is that directors of a UK company are not allowed to invoice the company for their work, they have to get paid by salary.
I don't know how it works in the UK specifically, but you might also have the option of "directors fees" (and of course dividends).

Right now the big question is where are the CUSTOMERS based? This could be the basis for structuring everything in an orderly and streamlined way...
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Old Nov 26th 2020, 10:57 am
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Originally Posted by astera View Post
I don't know how it works in the UK specifically, but you might also have the option of "directors fees" (and of course dividends).

Right now the big question is where are the CUSTOMERS based? This could be the basis for structuring everything in an orderly and streamlined way...
In my wife's case, customers in the UK, some potential for customers in Spain.
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Old Nov 26th 2020, 1:15 pm
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Originally Posted by quixote View Post
So the director could work in Spain for the company through the branch, be salaried in Spain (not autonomo) and also be salaried in the UK for any work actually carried out in the UK, paying personal tax on UK and Spanish salaries only in Spain.
As I understand it, a salary paid through UK payroll for work done in the UK is always subject to UK tax and social security deductions.
Likewise a salary paid through Spanish payroll for work done in Spain would be subject to Spanish income tax and social security deductions.
You declare total worldwide income in the country where you are resident, and the dual taxation treaty between the countries is then applied to ensure that the same income is not taxed twice. So if you live in Spain, you declare your UK salary, and the Spanish tax authorities apply the treaty, and depending whether Spain or the UK has the higher tax rates, you may have no extra tax to pay or there may be a small adjustment to be made.
But having said all that, I don't know if in practice you would be paid through two different payrolls and contributing to two different social security systems. I suspect there is a different mechanism that would apply in this situation.

Originally Posted by astera View Post
Right now the big question is where are the CUSTOMERS based? This could be the basis for structuring everything in an orderly and streamlined way...
I don't see why that is relevant to the personal/corporate tax issue?
Where customers are based is relevant to VAT, and also in terms of barriers to doing business (which in the case of a UK connection, isn't fully known yet).
But, where an individual is taxed is normally decided by which country their bum was when they performed those activiities. It your bum is in Spain, it doesn't make any difference to your income tax situation whether your customers for whom you are performing those activities are in Spain, the UK, Hong Kong, US, wherever.
Likewise, where corporate taxes are due is decided by where your company is established and operates, and if this is not clear cut, by applying the relevant tax treaty/treaties.
I can see that it's important to avoid cross border trade issues, so you would ensure you're trading from a country that can do business easily with the countries where your target customers are based - but what barriers there are, will depend entirely on what your business activity is.
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Old Nov 26th 2020, 3:55 pm
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Originally Posted by EuroTrash View Post
I don't see why that is relevant to the personal/corporate tax issue?
It can make a huge impact in certain situations, such as if you have no UK customers. In this case you could opt for a UK LLP which will in turn have no tax exposure in the UK, even though it will be based and registered in the UK. The entire tax burden is passed onto the partners of the LLP depending on where they reside. So this is a completely different setup from a Ltd company in the UK and would simplify things greatly if the OP had no customers in the UK.

Originally Posted by EuroTrash View Post
Where customers are based is relevant to VAT, and also in terms of barriers to doing business (which in the case of a UK connection, isn't fully known yet).
It certainly is, but only if you are dealing in physical goods or electronically supplied services. Other VAT changes are coming into force in July which will shake things up a bit more, but in a positive and orderly way.
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Old Nov 26th 2020, 5:03 pm
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Originally Posted by astera View Post
if you have no UK customers. In this case you could opt for a UK LLP which will in turn have no tax exposure in the UK, even though it will be based and registered in the UK. The entire tax burden is passed onto the partners of the LLP depending on where they reside. So this is a completely different setup from a Ltd company in the UK and would simplify things greatly if the OP had no customers in the UK..
Though to me that begs the question, if you don't live in the UK and don't trade in the UK, why on earth would you set up any kind of UK corporate entity? Seems more logical for your company to live in the same country you live in, that way you only have one set of corporation and tax rules to keep track of.
Saying that I suppose that if you are a Brit and if there isn't a simple Spanish company structure that you fancy that would do the job, you might want to stick with what you know. But on the face of it, it does seem a bit daft. If I'm missing something here, please help me out.
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Old Nov 26th 2020, 7:28 pm
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Originally Posted by EuroTrash View Post
Though to me that begs the question, if you don't live in the UK and don't trade in the UK, why on earth would you set up any kind of UK corporate entity?
Mainly because it's super-efficient (no tax exposure if you have no UK clients) and super-legit because you are a UK entity. Sure beats Mauritius...

Generally speaking it's a great structure if you intend to share your profits normally and have each partner account for those profits on a personal level, without the company having to deal with tax issues (as it's a "pass through" company). Here the money is distributed and then the individuals involved file their taxes locally.

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Old Nov 26th 2020, 8:13 pm
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Default Re: Invoicing your own UK Ltd co as Autonomo?

In my case, my customers are in the UK (all of them) and we currently have 4 employees (2 in the UK, 2 in Spain). I think I'm on a tally of 4 advisors here now who have all said the same as the first - we should have no problem invoicing our UK co as autonomo. I know this doesn't seem correct, so I have an appointment next week with a 5th one. 😂
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Old Nov 28th 2020, 6:28 am
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Default Re: Invoicing your own UK Ltd co as Autonomo?

These issues have been coming up for a long time, I've yet to see a clear explanation of how it can work.

https://www.accountingweb.co.uk/any-...s-shareholders
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Old Dec 15th 2020, 7:57 am
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Hi All - Just thought I'd post an update on this question as I have benefited from the discussion.

In the end, like nearly all the other people whose experience I have seen posted, we have decided to trade in Spain as autonomos from January and to mothball the UK company.

We came to this thinking the problem is with the director as worker. That is, if the director is working in Spain, are they a worker in Spain? If so they need to be employed in Spain so the company needs a Spanish 'permanent establishment' such as a branch or subsidiary. You could get around this in theory by paying dividends only, but even if that worked you'll end up paying a lot more tax that way.

However, what I found out is that the real problem is that there is a risk that the company as well as the director will be judged to be tax resident in Spain. This seems more difficult to me to escape because it is judged on the location of the 'centre of effective control', defined as, among other things, the place in which contracts are negotiated and concluded.

Like most tax things, the risk is in getting investigated, and it's probably unlikely, but there are enough problems in life without storing up that kind of worry for yourself. I prefer to try to do things by the book. Probably a lot of people have been getting away with this making 30k in the UK and living in the Costas, but it may get harder to do in the future.

It might be possible to run a British company if you returned in order to run it, say on a monthly basis. That might work and be appropriate for a business that depends heavily on in-person interaction.

Many people have responded to these questions by saying that we should seek professional advice -- the problem is we have done that and each time we have had a different answer back -- they can't all be right. Another reason to keep things simple.

Moving the business to Spain will probably mean we pay marginally more tax, but it will keep the EU market open to us. The main downside is that we were about to take on a part-timer in the UK and that will no longer be possible.
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Old Dec 15th 2020, 8:18 am
  #28  
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Originally Posted by quixote View Post
Moving the business to Spain will probably mean we pay marginally more tax
Did you calculate your new tax rate in Spain and directly compare with UK taxes?
What about running cost in Spain (accounting/VAT reports etc)?
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Old Dec 15th 2020, 8:30 am
  #29  
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Default Re: Invoicing your own UK Ltd co as Autonomo?

A local gestor/contabile has agreed to do it for 50EUR a month all in, which is similar to the annual accounting costs for the Ltd Co in the UK. If it becomes an SL it will probably be quite a bit more expensive than running the company in the UK.

Because of all the allowances it's hard to work out exactly what the tax will be, but I reckon it won't be more than an extra 10% and is more likely to be an extra 5%, which is fine. We're not moving here to save money, but so far (small town), life is so much cheaper here than in the UK this more than cancels out.
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Old Dec 15th 2020, 8:53 am
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Default Re: Invoicing your own UK Ltd co as Autonomo?

Originally Posted by quixote View Post
Hi All - Just thought I'd post an update on this question as I have benefited from the discussion.

In the end, like nearly all the other people whose experience I have seen posted, we have decided to trade in Spain as autonomos from January and to mothball the UK company.

We came to this thinking the problem is with the director as worker. That is, if the director is working in Spain, are they a worker in Spain? If so they need to be employed in Spain so the company needs a Spanish 'permanent establishment' such as a branch or subsidiary. You could get around this in theory by paying dividends only, but even if that worked you'll end up paying a lot more tax that way.

However, what I found out is that the real problem is that there is a risk that the company as well as the director will be judged to be tax resident in Spain. This seems more difficult to me to escape because it is judged on the location of the 'centre of effective control', defined as, among other things, the place in which contracts are negotiated and concluded.

Like most tax things, the risk is in getting investigated, and it's probably unlikely, but there are enough problems in life without storing up that kind of worry for yourself. I prefer to try to do things by the book. Probably a lot of people have been getting away with this making 30k in the UK and living in the Costas, but it may get harder to do in the future.

It might be possible to run a British company if you returned in order to run it, say on a monthly basis. That might work and be appropriate for a business that depends heavily on in-person interaction.

Many people have responded to these questions by saying that we should seek professional advice -- the problem is we have done that and each time we have had a different answer back -- they can't all be right. Another reason to keep things simple.

Moving the business to Spain will probably mean we pay marginally more tax, but it will keep the EU market open to us. The main downside is that we were about to take on a part-timer in the UK and that will no longer be possible.
We all try to avoid paying tax, but sometimes it is not worth the hassle and it is often easier just to abide by the rules.
I had many sleepless nights when my limited company was investigated. Fortunately I did not end up in the cell next to Lester Piggott. They found only one "irregularity". I had not declared a benefit in kind for using my mobile phone for personal calls.

I have often heard that a good accountant can save you more than his fee. IMHO this is an urban myth quoted only by accountants.
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