working from UK as a freelance for company in France

Question

I live in the UK and I work as a freelancer. I am not a Brtish citizen (but EU one), I live in London and previously I was hired by a company in the UK. Few months back I started to work for a French company as a freelancer. I was told that as a self-employed I just need to pay taxes in UK and invoice French company for my work. As the accountant in France started to have some doubts about it, I would be very grateful if somebody can answer this question. Thank you in advance.

Answer 1

Your situation falls under the European Union VAT system. In that category most freelancing should be a B2B service, which means the customer pays VAT in their country, i.e. you invoice without VAT and your French customer pays the VAT with their tax declaration. For more details see:

• http://ec.europa.eu, Where to tax?
• https://www.taxation.co.uk, Reversing the charge

This is all rather confusing to read for a first invoice. But if you do this for several customers in EU countries, or if you also buy services (e.g. use Amazon Web Services), then it does work quite well and simplifies invoicing.

Note: This is under the assumption that your are VAT registered in the UK, and both you and your customer have VAT IDs for the paperwork. Without a VAT registration it is probably slightly different and you should really seek local tax advice.

Answer 2

Well, any rules regarding tax will probably apply to most countries, especially the European continent. The general rule of thumb is that you declare your income in the country that you reside. As long as the money you're earning is from legitimate sources, I don't see an issue.

The UK government won't complain about receiving tax from a foreign source of income, and the French government can't prevent companies from outsourcing work to freelancers from other countries. Even if the French government punishes them with some kind of tax embargo, it will be theirs to pay, not yours.

Edit: Here is some more information that you may find helpful, so far no one has voted to close it: UK freelancer living in Thailand working for UK based clients...tax?

Answer 3

Have you declared yourself as self employed with HMRC? Are you planning on operating as a Ltd company? As @user3244085 says, you need UK specific tax advice, possibly an accountant.

As an abridged version:

UK residents pay UK tax. You declare your income either as self-employed or you start a Ltd company. For the formaer, contact HMRC and get a UTR code. For the latter, contact an accountant.

Answer 4

I have a UK registered consultancy business for 22+ years, and contracted in six EU countries - hopefully my time/experience counts for something.

The French accountant is more likely uncomfortable with the arrangement, but I believe with near certainty, is not illegal.

There is a law in many EU countries that I once heard refered to as a "chain law". It can effect contractors/consultants and this might be the concern of the French accountant. Basically, if you invoice the French company and do not pay your taxes, their concern is the French company might be held liable for them (and thus end up paying you and HMRC). My understanding is the UK does not have this law (but BE, NL and I think F and DE do). The French accountant will not be familiar with UK tax laws, assumes the worst and thus is possibly concerned that if you don't pay the Queen then he will have to do it for you.

I strongly recommend you read a previously answered question, https://startups.stackexchange.com/questions/8576/how-to-build-a-startup-freelance-software-qa-in-the-us/8585#8585 Register yourself a UK Limited Company - You only need to be UK resident and nowadays a single person can create a Limited Company (when I started trading you needed a minimum of two 'officers' to form an Ltd). Opening a company is easy, but maintaining a company has (a little) paperwork. My UK accountant charges about 400GBP a year and I recommend you follow a similar route. Alternatively there are consultancies that act as umbrella companies - you work for them as an employee, they raise your invoices and do the paperwork. In return, they'll charge an admin fee. I'm not a fan of this, but I know others who have followed it happily for years.

Expect to face some pains - ask any IT contractor about IR35 (Inland Revenue 35). The law came in 10+ years ago however the taxman has decided to re-examine and apply the law in a manner that makes contracting within the UK a less profitable business.