[northernfive]

Hi there
So, can anyone tell me what we would need to do......

My hubby works in Wellington (IT) and his job is a bit naff so he was going to start looking for another job after Xmas, then, by chance, an opportunity has come up with his previous employer in the UK - they have asked him if he will work for them again on a contract basis from NZ.

He would love to do it as he liked the work, the moneys good and it means he can work from home - all fab.

What would he need to do ? I assume he would need to find an accountant....any reccomendations ? (We are Lower Hutt). Also, do we need to tell Immigration ? Will they have a problem with him working for a UK company ? .....I assume becuase the tax will be going to NZ it will be fine !

Any thoughts/experience from others would be much appreciated!

[Moorf]

I work for an American and a Danish company from home - he just needs to register as self-employed which is very simple here (hey, if I can do it! :D ). Even the tax is pretty straightforward here.

I think that, as long as your OH has done 3 months in his permanent job, that there's no comeback with regards to working for himself... I assume they will take him on as a contractor, not sure about if they have him as a permie.

[ourquest]

First of all, from the point of view of job satisfaction, it sounds like a no-brainer. This will be influenced by self-discipline issues, home office space, complications with time differences and the ability to separate home and work, but only you will know the answers here.

The legalities will depend on the permit he holds to be in New Zealand. If you have PR, based on a job offer, then there is a certain amount of time which must pass before he is free to move on (to anything he wants to). As Moorf suggested, 3 months is usually the case?
It would be very different if he is on a WTR permit, or even a temporary work permit, or for that matter, not the principle applicant in any of them.
New Zealand immigration will not need to know if he is outside any permit restrictions at this time. And why would they mind anyway? He will be bringing foreign capital into the country to spend.
Check on double-tax agreements between UK and NZ. An accountant should know all about this.

[IanW99]

Have you discussed how you will be paid yet e.g. in GBP or NZD?
If it is in GBP then you will have problems with the exchange rate i.e. your income will fluctuate with the exchange rate.

It will also make filing your IR3 more complicated as you need to convert to NZD based on exchange rate tables that they provide (unless of course you use an accountant).

Depending on how you provide your service, you may have to pay UK tax first and then pay NZ tax on any amount over this. Because of double taxation rules this isn't actually a big issue regards the UK as NZ taxation rates are higher so you would have had to pay it to NZ anyway.

Ian

[ourquest]

NZ taxation rates are higher so you would have had to pay it to NZ anyway.

Ian

Ian, is it not the case that tax will get deducted at source (UK) and then, because the NZ taxation is higher there will be a balance that gets paid over to NZ? So NZ only ends up getting only the "top-up" amount. All the same to the employee, but it does make the accounting more complex?

[IanW99]

Ian, is it not the case that tax will get deducted at source (UK) and then, because the NZ taxation is higher there will be a balance that gets paid over to NZ? So NZ only ends up getting only the "top-up" amount. All the same to the employee, but it does make the accounting more complex?

Yes, I think you are saying the same thing as me :yes

As you say, the UK income would be taxed at source, you would then need to show NZ IRD how much you have earned (in NZD) and how much tax you have paid (in NZD) and work out and pay the balance ("top up").

Ian

[Jo Jo]

Yes, I think you are saying the same thing as me :yes

As you say, the UK income would be taxed at source, you would then need to show NZ IRD how much you have earned (in NZD) and how much tax you have paid (in NZD) and work out and pay the balance ("top up").

Ian

I'm confused!

Under what circumstances would you be liable to pay UK tax?

[ourquest]

Under what circumstances would you be liable to pay UK tax?

I'm no accountant, or tax specialist, but this is how I understand it to work. Ian will be able to confirm or refute.

"source" would be in the country from which you are being paid, so in this case the UK. Because the employer pays you as their employee, tax will be deducted at the UK rate of tax. You can viably live in NZ under these conditions because the UK and NZ have a double taxation agreement, preventing you from having to pay tax twice on the whole amount you earn. What you do have to do, though, is pay (in total) at the higher tax rate of the two countries. This is New Zealand, and because you would be a resident of New Zealand, and the tax rate is higher, you pay tax in New Zealand on what you earn ex-UK at this higher rate, less the amount you already paid in tax in the UK.. If it was the other way around, and you were paid in NZ but living in the UK, you would be taxed at source in NZ and because it is the higher rate already you would have no additional liability for tax in the UK.

[IanW99]

I'm no accountant, or tax specialist, but this is how I understand it to work. Ian will be able to confirm or refute.

"source" would be in the country from which you are being paid, so in this case the UK. Because the employer pays you as their employee, tax will be deducted at the UK rate of tax. You can viably live in NZ under these conditions because the UK and NZ have a double taxation agreement, preventing you from having to pay tax twice on the whole amount you earn. What you do have to do, though, is pay (in total) at the higher tax rate of the two countries. This is New Zealand, and because you would be a resident of New Zealand, and the tax rate is higher, you pay tax in New Zealand on what you earn ex-UK at this higher rate, less the amount you already paid in tax in the UK.. If it was the other way around, and you were paid in NZ but living in the UK, you would be taxed at source in NZ and because it is the higher rate already you would have no additional liability for tax in the UK.

I'm also no accountant or tax specialist so could easily be wrong, my point of the post was actually regardless of being taxed in the UK, the overall amount of income tax paid would be based on NZ rates.

I was not commenting on liability of paying tax, just that if you do, it doesn't actually matter due to double taxation rules and NZ tax rates being higher.

I agree with the overall comments made by ourquest and is in relation to being employed by and working for a UK company.

Ian

[Moorf]

If you're contracting then surely, like my contracts with the U.S. etc, the money is just invoiced, by you, and no tax is paid on it in the country of origin... just NZ tax?

[Sam B]

Well I have a UK income, and I get taxed on it in the UK, then pay a bit extra here as the tax rates are higher. If that makes sense.

Sam

[Moorf]

Are you an employee of the UK company, Sam, or are you contracting?

[ourquest]

Are you an employee of the UK company, Sam, or are you contracting?

I think you are entirely right re tax as a contractor, that you are then self employed and pay tax wherever you are resident (NZ) on your invoiced income. In some countries it gets complicated if you contract to one client, or one major client only, because for tax reasons it can then be construed as employment...but I do not know if that is the case in NZ. Sam can probably enlighten us there.

[Moorf]

Oh crumbs, don't get me started on IR35 !!! OH and I were self-employed in the UK for a number of years before moving here.

There's nothing comparable with IR35 here, as far as I am aware.

Otherwise, I am not sure why you would pay tax in the UK, unless you are an employee of that company, not contracting.

Plus, as with oil-workers etc, if you are an employee of a UK firm and working abroad, are you able to get the tax breaks for being out of the country for extended periods of time? (if they are still doing that....).

[eternalkiwi]

It is still possible to be a (NZ based) self employed contractor and not be classified as an employee.
NZ employment law does require a valid reason why a company employs someone as a contractor instead of an employee, though as the company is UK based I do not think this would be relevant.

Shawn

[Sam B]

I'm a landlady - I rent out a property. The tax laws sound more complicated than I realised.

[Moorf]

I'm a landlady - I rent out a property. The tax laws sound more complicated than I realised.

Oh ok, I thought you meant income from working (although, after renting out my place for 15 yrs I think it could often be described as work... thank god for agents!) :D

[Sam B]

Nah, got enough work on here to keep me going. Just a nice easy income.

[incredible hulse]

Oh crumbs, don't get me started on IR35 !!! OH and I were self-employed in the UK for a number of years before moving here.

There's nothing comparable with IR35 here, as far as I am aware.

There's the attribution rule (80/20) that is a similar concept

[Moorf]

Yep, 80/20 for the attribution rule - but a lot easier to understand and navigate, as are most of NZ's tax-related things imo. I guess I don't have that problem as I have multiple contracts on the go at once.

[Jo Jo]

Uh oh - what's the 80/20 rule?

[incredible hulse]

Uh oh - what's the 80/20 rule?
If you earn 80% of your contracted income from one source (typically one contract) your income is taxed at the personal rates (usually 39%) rather than at the business rate (33% ?) even if you have been working through a company/trust, etc. Similar to IR35 in parts without the NI component. That said plenty of ways round it as there were with IR35.

Tin hat on now but to be honest I don't see the harm in IR35/80-20 rulings. As a contractor of many years in the IT field I think we had many years of paying very little (%-wise) tax, by setting up ltd. companies, etc., whilst being in long contracts with one employer for years. There was nothing wrong with this as it was exploiting the taxation rules in place at the time but it was obvious the taxman was going to come after us. Way I look at is we should take it on the chin and either look at ways round it, become a proper business with multiple clients, or just be thankful of the years when you could get your tax down to 24%

[Jo Jo]

Ah, I see. Thanks for the explanation, IH.