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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am have been offered a short term (2 year) fixed term contract

Resolved Question:

I am have been offered a short term (2 year) fixed term contract with a company in Dubai. Is it more efficient to set up a company and have them pay the company, or pay me as an employee. I will be based in the UK 90% of the time.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

How much will you be earning? Will most of the work be carried out in the UK? Will you incur much in the way of expenses?
Customer: replied 2 years ago.

I should be earning around £100k per year with expenses of C£10k.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.

many thanks

Expert:  TonyTax replied 2 years ago.

Hi again.

If you work as a UK based employee of the Dubai company and that company has no base in the UK, then you will either have to run your own payroll each month to work out the tax and national insurance contributions and pay the dedutions over to HMRC. Read about that here. Alternatively, you could register for self-assessment, complete an annual tax return and pay the tax and NIC after the end of the tax year, together with payments on account of the next year. Assuming you remain as a UK resident and work as an employee, you will pay tax on income received.

If you set up your own company and had a contract drawn up in such a way as to avoid IR35 problems, you could pay yourself a lower salary to keep the national insurance liabilities down and draw dividends which are not liable to national insurance to top up your income. This way you can minimise your exposure to higher rate tax by controlling your drawings from the company. The company would pay corporation tax at 20% on profits up to £300,000. Whilst salary will be a deductible expense for the company, dividend payments will not.

Take a look at the calculator here through which you can compare tax liabilities depending on how you set yourself up. You can read about IR35 here and here.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15840
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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