canadian corporation working corp-to-corp. in UK?

pzi123
New Member



Joined: 11 Apr 2008
Posts: 3
Location: Denver

Posted: Fri Apr 11, 2008 6:47 am

 

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I have a 1 person corporation in Toronto and work in US and Canada on corp-to-corp. basis for the last 15y or so.
I live in US and sign contracts with US corporations which pay my Canadian business and my business pays me. I pay only US taxes on that income because of the US-Canada tax treaty.
Does anyone work corp-to-corp. in UK through their Canadian corporation?
I would be interested in learning the details on signing contracts with UK businesses - are they willing to do so, what permits they ask for?
On the personal side if I live in UK and pay myself through Canadian corporation how do I show this income to UK authorities. Is there a tax treaty between UK and Canada like between US and Canada?

cheers
-Peter

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 1582
Location: Calgary

Posted: Sun Apr 13, 2008 9:58 pm

 

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Yes there is a tax treaty. I have UK clients, I just issue an invoice and they pay it. Whether you do it via a corporation or not doesn't really matter, it's where the work is performed that counts.

The tax treaty provisions are actually easier to do in the UK, you need this form: http://www.hmrc.gov.uk/cnr/form_canada.htm At least for basic income tax, when it comes to the other blizzard of taxes there is a separate form for each (e.g. R105 for stopping withholding on a UK bank account).

Most people don't do tax returns in the UK, it's all done automatically by HMRC. If you're self-employed then you have to do a tax return and of course corporations have to.

If you're just invoicing people and then paying yourself in Canada, really all you need is the tax treaty claim. Check with HMRC non-residents dept. though.

If you establish residential ties in the UK then you have to claim the tax treaty exemption obviously.

I can't comment on the immigration issues that come up, what I've been told by HMRC is that if you engage in visits with clients or training for up to two weeks, they don't consider that to be "working" in the UK. That comes from case law.

Residential ties are the same as under Canadian tax law, i.e. physically present for more than 90 days, or you have other significant ties such as a driving licence, etc.
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Steve.

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pzi123
New Member



Joined: 11 Apr 2008
Posts: 3
Location: Denver

Posted: Thu Apr 17, 2008 7:01 pm

 

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I think I plan a slightly different arrangement then yours. You reside in Canada and pay Canadian taxes. You probably have small assignments in UK and you spent most of the time in Canada. What I plan for UK is what I have now in US - reside in US and pay US taxes on the income from Canadian corporation operating in US. The key element in US is to have so called EIN number for your Canadian corporation which allows you to operate in US. Without this EIN nobody in US would sign the corp-to-corp. contract with my Canadian corporation. Beside this EIN - which you get easily from IRS - you have to file Canadian Corporation tax return with IRS claiming that you do not have permanent establishment in US and your corporation will pay all taxes in Canada (form 1120F and 8833). This is based on tax treaty. I am looking for this type of Canadian Corp. to HMRC procedures.

Thanks for the pointer to the Her Majesty Revenue and Customs web site. I suffer from complete lack of information about UK and did not know what IRS is called in UK - now I know.

From what you said at the beginning of your post is that there is nothing that Canadian corp. needs to have to operate in UK - "I just issue an invoice and they pay". This is something I will have to double check with HMRC.

thanks Stephen!
-Peter

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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 1582
Location: Calgary

Posted: Sun Apr 20, 2008 3:41 pm

 

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The only real invoicing difference is that the GST is zero-rated on the invoices because it's classed as an export.

There definitely is a tax treaty for corporations as well as individuals, but like all tax treaties you have to read them very closely because people try and get creative with their taxes (claiming exemptions, benefits, etc.) and the tax treaties are usually quite inflexible and only envisage the most basic sorts of situations.

I have to say if I was in the US I would actually start a US corporation and make it a wholly-owned subsidary of the Canadian corporation. Depends on how much you're earning in the US though because US corporate taxes are higher in the lower medium end than Canadian ones and you can't claim S-corporation as a non-immigrant alien.

But presumably the US corporation can claim a tax treaty exemption anyway, that's how I would do it. Makes the legal side easier plus you can shoot all the money through from one corp to the other in one go, so the exchange rate calculation and the T2 become simpler to do as there is only one payment.

And if you become a permanent resident of the US and still do business in Canada, you can just swap the ownership around so the Canadian corp. becomes owned by the US one. Not sure if an S-corp can have a Canadian subsidary though.
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Steve.

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pzi123
New Member



Joined: 11 Apr 2008
Posts: 3
Location: Denver

Posted: Mon Apr 21, 2008 5:46 pm

 

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NAFTA is one of the reasons why starting US corporation to replace Canadian one is a mistake. Canadian corporation operating in US filing treaty based position tax return - a null tax return is a huge saving in effort.
Canadian corporations also have much more flexibility in operation and reporting.

I am reading on the UK Her Majesty RC web site and I see that UK system is quite similar to Canadian business rules with 12 months cycles, etc. Not like with US quarterly returns. I emailed HMRC about the requirements for Canadian corporation operating in UK. If or when I learn something concrete I will post it back here.

-Peter

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klynch
Junior Member


UK & CANADIAN TAX

Joined: 07 Feb 2008
Posts: 17
Location: Cheshire

Posted: Tue May 27, 2008 12:06 pm

 

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I am a UK chartered accountant and Canadian CGA in practice in the UK. I am available for tax planning, advice and return preparation. Reasonable rates. See my website. lynch.pro

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