“Brits who are most likely to get snarled up in the confusion are contractors working outside of Britain on a semi-permanent basis,” the Dubai-based firm said.
Those in the EU outside the UK should be particularly wary after HM Revenue & Customs said it was “massively stepping up” requests for help from foreign tax authorities.
Confusion around UK legislation called IR35, which is designed to combat tax avoidance by uncovering ‘disguised employees’, shows that mistakes can easily be made and very expensive.
Paying workers through a limited or personal service company can deprive HMRC of national insurance contributions and tax, which it is understandably keen to recoup.
Agony
The situation for contractors was described as “agony” in a blog by Kevin Austin of international mobility and contract managers Access Financial.
Commenting on Holborn’s warning, he said: “The Revenue’s rules in this area are very complicated and it can be hard for people to know whether they are resident or not.
“The danger for British workers lies in the complexity of the HMRC’s own regulations. It’s easy enough to end up owing tax to the UK even though you are convinced that you qualify for the status of ‘automatically overseas’.
“The best way to navigate the HMRC’s ‘183 days’ test and the ‘sufficient ties’ test is to hire a guide; in cross-border tax planning, financial advisers come into their own.”
