New Zealand - Working for a UK company whilst living in New Zealand

Mark79

15th January 2008, 08:53 PM

IanW99

15th January 2008, 09:12 PM

Sorry if this is in the wrong forum - I'm not sure if it's a money, work or immigration matter. :)

My wife and I are moving from the UK to New Zealand in April 2008. She has a job offer, so is getting in on a Talent Visa, and will be sponsoring my Open Work Visa application, but I am unsure as to how my personal work situation will evolve.

Currently, in the UK, I own and run a web design business and get paid via a combination of wages and dividends. I have a few options for my future employment, but, in the short term, it seems likely I will continue to work for my UK business whilst living in New Zealand (the beauty of a web-based job!). The problem is, I'm not sure how this will affect my tax situation and also whether it will invalidate my New Zealand visa. What are my options for receiving UK income? Should it go to a UK bank account or to a NZ one? Where do I pay tax - UK or NZ? Am I required to have NZ-based employment whilst living there?

Has anyone on these forums been through a similar situation and/or can anyone recommend someone in the UK I could speak with regarding this? NZ Immigration (London) have told me I can't work for a UK company, but I'm not convinced they were 100% certain.

Thanks for your help!

Mark

If the principal applicant is your wife and you have an open work permit then you are free to do any job you please (or not work at all if that's an option).

If you live in NZ then you will become resident for tax purposes, so will have to pay tax to IRD.

Now if you are paying income tax to the UK, then they have a double taxation treaty with NZ so you won't have to pay this tax again.

What happens is that you fill in an IR3 in NZ which you tell them how much you earned and you also tell them how much tax you paid and then you work out how much you would have paid NZ. If you should have paid NZ more than you have paid in taxes so far, then you need to pay them the difference. You of course need to provide proof of all this.

Your wages can go to a UK or NZ bank, it's your money and you can pay it into any bank you choose. If you do get paid in GBP then you need to work out how much you have effectively been paid in NZD (using information provided by IRD) and use these figures as your income.

As the exchange rate fluctuates, normally I would advise that if you can arrange it, then get paid a fixed rate in NZD (easier to budget and sort out the taxes) but otherwise not a problem.

Ian

IanW99

15th January 2008, 09:13 PM

BTW, I didn't notice that this was your first post, so here's a belated welcome to the forum :)

Ian

Mark79

15th January 2008, 09:22 PM

If the principal applicant is your wife and you have an open work permit then you are free to do any job you please (or not work at all if that's an option).

If you live in NZ then you will become resident for tax purposes, so will have to pay tax to IRD.

Now if you are paying income tax to the UK, then they have a double taxation treaty with NZ so you won't have to pay this tax again.

What happens is that you fill in an IR3 in NZ which you tell them how much you earned and you also tell them how much tax you paid and then you work out how much you would have paid NZ. If you should have paid NZ more than you have paid in taxes so far, then you need to pay them the difference. You of course need to provide proof of all this.

Your wages can go to a UK or NZ bank, it's your money and you can pay it into any bank you choose. If you do get paid in GBP then you need to work out how much you have effectively been paid in NZD (using information provided by IRD) and use these figures as your income.

As the exchange rate fluctuates, normally I would advise that if you can arrange it, then get paid a fixed rate in NZD (easier to budget and sort out the taxes) but otherwise not a problem.

Ian

Thanks for your help, Ian.

So, who decides whether I pay UK tax or NZ tax? Is it my decision or based upon where I am living for most of the year? Is my understanding correct that I would pay UK tax and then, if any more is due on top of this to match my equivalent tax demand in NZ, I would need to pay the difference?

So, for example, if I owe £100 of tax in the UK and (the equivalent of) £120 tax in NZ, I would pay £100 to the UK IR and £20 to the NZ IR. Is this correct?

Would my status in NZ be 'self-employed'?

Is this something you have been through yourself?

IanW99

15th January 2008, 09:39 PM

Thanks for your help, Ian.

So, who decides whether I pay UK tax or NZ tax? Is it my decision or based upon where I am living for most of the year? Is my understanding correct that I would pay UK tax and then, if any more is due on top of this to match my equivalent tax demand in NZ, I would need to pay the difference?

So, for example, if I owe £100 of tax in the UK and (the equivalent of) £120 tax in NZ, I would pay £100 to the UK IR and £20 to the NZ IR. Is this correct?

Would my status in NZ be 'self-employed'?

Is this something you have been through yourself?

Wish it was your decision, but no it will be down to UK and NZ as to your residence status for tax purposes (don't confuse this with residence for immigration purposes). Check out the IRD (http://www.ird.govt.nz/) website for details. But yes it's mostly down to where you spend most of your time.

Your understanding of payments is correct.

It may be possible in your case to not have to pay UK tax at all and just pay NZ but I guess that would depend on how you organise how you are paid and if you can avoid paying UK? I can't advise you on this though. I can say that at the higher wages (above NZ$90K) you are likely to owe NZ some money however it is arranged (so it doesn't really matter).

You could be self-employed, IRD don't seem to care? There are others on the forum who do contract work around the world so maybe they can advise further?

I do a similar thing except that I still work for a UK employer. I suspect your situation offers a bit more flexibility and I would probably be seeking an accountant to maximise the benefits.

Ian

Mark79

15th January 2008, 11:21 PM

I can say that at the higher wages (above NZ$90K) you are likely to owe NZ some money however it is arranged (so it doesn't really matter).
If I pay tax in the UK and it turns out being less than what I would pay in NZ, do I claim a rebate in NZ? It seems to make sense that I just pay tax straight to whoever will be getting it, so I'll investigate this a little further.

I would probably be seeking an accountant to maximise the benefits.
I'll have a word with my accountant to see if they have any experience of this or can point me towards a financial adviser who deals with this sort of thing.

Again, thanks for your help - it's been invaluable so far! :)

Mels

16th January 2008, 12:30 AM

If the principal applicant is your wife and you have an open work permit then you are free to do any job you please (or not work at all if that's an option).

does that mean the principle applicant cannot keep a pre existing freelance company going in UK and transfer earnings to NZ as well as job in NZ?

IanW99

16th January 2008, 05:47 AM

does that mean the principle applicant cannot keep a pre existing freelance company going in UK and transfer earnings to NZ as well as job in NZ?

Good question, I would say that as long as you had a full time job in NZ then anything extra that you do above this is up to you. You would still of course have to sort out taxes as mentioned previously.

Obviously you are being granted a work visa so that you can work in NZ and help NZ business not just be able to live in NZ.

I'm no expert on all of this, and am a bit concerned that the OP had been told by NZIS that he can't work as they really should know what they are talking about.

But personally, I know of no rules that preclude this and the IRD forms allow for it so at least they believe it to be acceptable, and if I was wrong I would have expected a knock at the door by now :exit

Ian

IanW99

16th January 2008, 05:53 AM

If I pay tax in the UK and it turns out being less than what I would pay in NZ, do I claim a rebate in NZ? It seems to make sense that I just pay tax straight to whoever will be getting it, so I'll investigate this a little further.
...

This is where I don't think that it works in your favour. The double taxation treaties are really there to stop you paying the same taxes twice and not so that you could claim some of them back.

If you paid more taxes in the UK than you would have done in the NZ then this is because you owed these taxes to the UK and so can't somehow claim them back - or at least that is how I understand it.

It is this sort of possibility where I would advise an accountant as you may be able to avoid paying UK taxes at all and just pay what NZ want, thus saving you money.

Ian

James 1077

16th January 2008, 07:36 AM

Mark

The basics of it are that you'll be taxable where ever you are tax resident. The tax residency rules for both UK and NZ are similar I think so there shouldn't be much confusion there - it will be wherever you spend more than 183 days.

To complicate matters further as you are working for a UK company you will probably have to still operate a PAYE scheme (although this is where I get out of my depth as I'm a Corporate Tax specialist!). This means that you will have tax withheld from your wages in the UK, even though you probably aren't taxable in the UK. However, HMRC have realised that this is silly so you can apply to go onto a s690 scheme where you only have a small percentage of your salary taxable under PAYE in the UK (the percentage will depend on your UK duties).

Basically you will be taxed in the UK on any duties performed in the UK and that tax will be able to be relieved against NZ tax - but only to the extent of NZ tax payable on that income. So if UK taxed the income at 40% and NZ would only tax it at 30% then you only get relief on 30% of the income; leaving you with an overall rate of 40% on that income.

All lovely and complicated!

Corporation tax-wise it is also nice and complicated. Assuming you are an owner-manager of your company it is probably correct to assume that you are the main decision maker. A company's tax residency is based upon where strategic decisions are made, so if you move to New Zealand it is likely that you will be making those decisions (and holding board meetings to record these) in New Zealand. Your company will therefore suddenly become tax resident in New Zealand and will therefore need to be registered for tax in NZ and HMRC in the UK informed.

So that is lovely and complicated too.

Finally, I imagine that when your company registers for tax in NZ it will also have to start withholding tax from your salary and paying that over to the NZ Inland Revenue (this is, at the moment, outside of my area of expertise so don't trust me on this one). You will therefore need to operate an NZ payroll (or get someone else to do it for you).

I can't help with the legal side around whether you are allowed to do this under your visas etc, sorry.

My advice is to talk to an accountant about how to do this but I would suggest that your best bet would be to incorporate a New Zealand company and run your business through them. Structure-wise you could incorporate the NZ company through your UK one (so the UK co owns the shares) and this would help keep the name etc going for your UK clients. You could do something where UK contracts were made by the UK company and the sub-contracted to the NZ one; that way VAT etc also stays relatively simple for your clients. But remember your UK holding company will probably be NZ tax resident anyway!

But as mentioned above go see an accountant who specialises in this sort of thing!

James

Mark79

16th January 2008, 08:34 PM

Ian, I'm not convinced the lady at Immigration was sure on the things she told me. She said I can work for any employer, which, I confirmed, includes workings for myself. I then asked her whether I could work for a UK or Australian company and get my wages that way, to which she said (along the lines of) "no, you won't be able to do that as how would you pay your taxes?". A confusing answer, if anything!

James, thanks for this information; it certainly helps to clear a few things up. As I said in the original post, I'm paid a combination of wages and dividends and my PAYE/NIC-eligible part is under the threshold for tax. Tax is due on the dividends in the form of Corporation Tax. Having paid no UK PAYE/NIC, will I be expected to pay the full NZ tax amount, thus removing any benefit of being paid in this manner?

Also, is the UK tax amount considered to be the combined PAYE/NIC total or just PAYE?

With regard to my company, it is owned by two people, one of whom will be staying in the UK, and decision-making is shared. To keep things simple, would I be advised to ensure the bulk of the company remains in the UK? Having a New Zealand company is something I am considering already.

Bearing in mind the continuation of my UK work may be short term only, it would be nice to keep things as simple as possible until I'm settled in NZ and can then think about the best approach to doing something more permanent. Shame it doesn't sound simple on any level! :)

James 1077

16th January 2008, 10:47 PM

Ah, if the company is owned by two people then it will be easier to keep it UK tax resident as you can keep control in the UK. That will make things simpler.

The way you keep the company controlled in the UK would be to give the UK director either a power of veto over your decisions (and so therefore he would effectively control the company). This may not be commercially viable so the other method is more documentation intensive but basically you need to show that the UK director is the person who makes the strategic decisions (not day to day). He should therefore chair any board meeting and should also telephone you for the board meeting conference call (and have it recorded that he has done that and from the UK). Any emails etc discussing anything strategic should have him showing that he has the final say (so emails go back and forth and finish off with the UK director saying something along the lines of "OK, so the decision is we will do ...". This way the company stays UK resident which means you don't need to worry about NZ corp tax rules.

With respect to UK duties the only bit that is taxable/NICable in the UK is the salary part; so as this won't be above the earnings threshold you won't pay any UK tax on this. Nor will you pay UK tax on the dividends as you are non-UK resident. You may need to still complete a UK tax return showing nil payable though.

NZ-wise I can't help on how the income will be taxed. My assumptions are that the company will not be able to operate a payroll for you so you will receive salary gross and will need to pay your NZ tax through an annual tax return. I'm not sure about the dividends but think that these will probably remain tax-free for 4 years under the Temporary tax exemption on foreign income. After that they will become taxable in NZ I imagine.

You are probably best off getting in touch with an accountant in the NZ city you are off to and asking them how various things will be treated for tax in NZ; it may not cost too much if you hint at them getting more work in the future! :yes

A UK accountant can advise on the UK management and control part and help out with the other UK bits as this is only really general advice and your circumstances could be a little different!

Mark79

16th January 2008, 10:58 PM

That will make things simpler.
That's better! :)

A UK accountant can advise on the UK management and control part and help out with the other UK bits as this is only really general advice and your circumstances could be a little different!

I've contacted my accountant to see if he can advise on this sort of thing, otherwise I'll locate a specialist either here or in NZ.

Again, many thanks for your help. :D