Own limited company or a management company for a six-month German contract

Hi Barry, thanks for your response. I did actually wonder whether you would input into this.

Firstly, thank you for putting the record straight. My initial comments were not meant in a derogatory nature in any way. Secondly I appreciate as a Chartered Accountant you are bound to give best advice.

My question arose from reading several sources (your articles on UKTECH being one source) regarding contracting abroad. I was offered the management company option but after considering their package, with the usual offshore money arrangements, together with the fees and also "extras" I decided to look into using my own Ltd Co.

That said, I agree the "control" issue is the most subjective part of this. However, on top of my initial comments regarding invoicing, business activities etc, looking at the overall situation, there is provision to work from the UK, so I would not be "Germany bound" for the whole duration. Secondly, the duration of the contract is 6 months. I am aware of the 183 day rule for personal tax reasons. As far as I am concerned there is probably something similar with regard to company taxation.

So in answer to your question, from my research, it seems for short durations it is feasible to use a Ltd co. The issue of risk in my opinion is either take the risk or pay a management company a hefty fee per month for the "privilege" of being their employee. Since the duration is less than 6 months then it would hardly seem worth the effort to suspend trading in the UK. For a longer term, I would agree that using a management company would be a more viable solution, but for short term contracts I cannot see the point.

To my mind, essentially the business decision to take a contract overseas would already be made before departure, leaving myself to perform employee duties on contract. Essentially invoicing and the usual VAT, tax, PAYE etc, would all be UK based activities. As you said, unless it was a sufficiently large amount of tax, and with the complex residency issues, then for such short durations I can't see the German tax dept making too much of it. Several other accountancy sources have also input into this and the consensus seems to be for short term, using a UK ltd co is OK.

One thing I did notice reading the Double Tax Treaty (enthralling reading I can assure you) is that construction companies can now apply for an exemption certificate. I am wondering whether this is also applicable in the IT/engineering line of work.

Once again thanks for your response.

-- jap