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bigduckontax, Accountant
Category: Tax
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My partner has been offered work in germany probably 10 days

Customer Question

My partner has been offered work in germany probably 10 days a month on going
whats best being employed by the german company- what are tax implications
or setting up his own uk company and contracting to the german company
poss earning 50k a year
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

Hello, I'm Keith and happy to help you with your question.

10 days a month is 120 days a year. Presuming your partner spends the balance of thier time in the UK then they will be liable to UK Income Tax on their income world wide. Any tax deducted by the German authorities would, under the Double Taxation Treaty between the UK and Germany, be available as a tax credit against any UK tax on the same cash flow, the aim of the Treaty being to ensure that the same income stream is not taxed in both jurisdictions. Reciprocal arrangements are in place for the German equivalent of UK National Insurance (NI) to be effective.

If he sets up an UK company then that company would be taxed under the UK Corporation Tax regime at 20% on net profits. Were he a director he would be deemed an employee per se and any emoluments passed to him would have to be within a PAYE envelope. NI deductions would me made any any employer's element a company liability also.

I do hope I have shed some light on your partner's position.

Customer: replied 3 years ago.

if he sets up his own company effectively he pays 20% tax on his earnings- consultancy less expenses of travel ?

dont understand the director and what are emoluments - how are they differnt form profit

he is basically doing software consultancy- someone in germany will find him the work - he will pay them 20% of his fee and he will pay expenses

he will probbaly earn 50k after decuting the20% to person running german company

any idea what is best way to go

Expert:  bigduckontax replied 3 years ago.
Not quite, the UK company would pay Corporation Tax on the net profit at the Small Companies Rate of 20%. The moneys would be locked into the company unless it paid him a salary. If he sets up a German company then German taxation is beyond the scope of this essentially UK based tax site, but see my note on German tax credits.
A Director is an employee per se and there is no way around that. If salary is drawn from an UK company this must be paid through PAYE arrangements, tax and National Insurance contributions being paid and levied.
In any event as he spends more than 183 days per annum in the UK then he will be taxed on his income world wide. If a German company distributed it it would be subject to UK taxation. If they hold it then it is effectively locked up.