Can I set up UK company from which I invoice my overseas salary

Can I set up UK company from which I invoice my...

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I am CTO and 20% shareholder of a technology company in Israel.

The company has historically worked with contractors who invoice the company and manage their own income from there. It makes sense to me to do the same for my own salary, but there is the additional complication I am a shareholder.

Would it be legal and appropriate for me to set up a UK company that I own 100%, invoice the Israel company an amount each month for my services, and then take a salary and/or dividends from the UK company as I see fit? 

The benefits for me are that I have complete control over how I manage my income and tax, as currently the most tax effective way is to wait for EOY and then take a dividend for my share.

Is this a normal practice, or am I way off the mark? To me it sounds like what we have done with contractors, but as I am a shareholder perhaps it would be considered as avoiding tax in Israel?

Thank you very much for any input.

Replies (7)

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By sash100
31st Dec 2014 11:04

issue

The only issue is that you probably deemed to be an employee of the Israeli company and therefore should always be under PAYE

Shareholders and invoicing is fine but IR35 and disguised employee could be a problem

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By andyh82
31st Dec 2014 12:04

extra note

Sorry one more note - although the majority of my work is for the Israel company, I also have shares in 2 other UK companies and work for those companies on a day to day basis.

In that sense, I am providing services to multiple companies and not a full time employee of any. I just happen to be a director and own shares in all the companies I work for.

Perhaps that mitigates IR35?

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By sash100
31st Dec 2014 12:26

IR35 is complex and changing from employee to a director of a limited company may seem suspicious plus you are an office holder within the company. IR35 looks at the underlying relationship (between you and the client with each contract. 

With due respect I would suggest to get a clear cut answer that you do decide to contact a local accountant who does specialise in this area

 

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By zebaa
31st Dec 2014 12:51

The problem may well turn out...

...that there is NO clear cut answer to the IR35 question. It depends in andyh82 attitude to risk.

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By andyh82
31st Dec 2014 13:01

thanks

Thanks, I will definitely be looking for full advice before moving forwards. Ultimately it seems to me the only people losing out is the Isreal as they'll have less CT. As it stands, I would look to pay Israeli CT on my share of the company profit, and then extract a dividend to UK paying HMRC equiv 25%. However, f I pull the money into a UK company, I'll have to pay either PAYE or CT+dividend which will yield more than taking a direct dividend from the Isreali company. Perhaps its tax advice in Israel that is really needed to avoid any issues there.

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Replying to penelope pitstop:
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By sash100
31st Dec 2014 13:42

WHT on dividends

andyh82 wrote:

Thanks, I will definitely be looking for full advice before moving forwards. Ultimately it seems to me the only people losing out is the Isreal as they'll have less CT. As it stands, I would look to pay Israeli CT on my share of the company profit, and then extract a dividend to UK paying HMRC equiv 25%. However, f I pull the money into a UK company, I'll have to pay either PAYE or CT+dividend which will yield more than taking a direct dividend from the Isreali company. Perhaps its tax advice in Israel that is really needed to avoid any issues there.

I understand the israeli withholding tax is 20% but the UK and Israel Double Tax Treaty dividends should be taxed at 15% therefore you will end up losing 5%. I think you would need to file a return in Israel to claim the difference between between the Israel and Treaty withholding tax rates ?

Yes, Israel Corporation tax rate is higher than the UK by 5%

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By zebaa
31st Dec 2014 13:19

tax treaty

Google 'double tax treaty with Israel' for further information, to start with. Very much agree with the 'take advice' advice.

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