Many individuals move to the UK every year to work as expat contractors. Individuals hailing from non-UK or European Union (EU) countries can avail an array of benefits by working in the UK. The UK economy faces a steep skills shortage, and people from other countries can leverage this skills scarcity to find potential work opportunities in the UK as expat contractors. However, there are certain rules and guidelines that have to be followed to become a legally accepted contractor working in the UK. This article outlines the major areas to focus on if you’re planning to move to the UK as an expat contractor.
How to Work and Live in the UK?
Most potential expat contractors who want to move to the UK need to have a visa to work and live legally in the UK. There may also be some other additional entry visa requirements if one is seeking to move in with family members.
Most people hire the services of professional immigration experts to seek assistance with understanding the UK visa system and its requirements. Based on factors such as the skills and work tenure, different types of work visas are allotted. One of these is the ‘Working Holiday’ visa, which is valid for up to one year for expat contractors hailing from Commonwealth countries or any British Dependent Territory. The visa is also valid for any British Overseas Citizen. Individuals wanting to work in the UK as contractors can visit the UK government’s Visas and Immigration website for information about all types of work visas. On an average, it takes six to eight weeks for the visa to get cleared. Expat contractors also have the option to upgrade their visa while still working in the UK.
Visas: Which Tier?
Most expat workers are required to apply for visas under any one of the five categories mentioned below:
- Tier 1 high-value workers
- Tier 2 skilled (general) workers
- Tier 5 temporary workers and the youth mobility scheme
- Other categories
- UK ancestry for Commonwealth citizens.
The tiers were originally formed to permit skilled individuals from a wide range of backgrounds to work in the UK. Applications for Tier 1 general skilled workers are now closed, but there are still several other categories that an expat contractor can qualify for under Tier 1. These could be entrepreneur, investor or graduate entrepreneur. The Tier 2 skilled (general) work visa is the most suitable visa option for a majority of the expat contractors. The Tier 2 skilled (general) work visa can be applied for if you have received a skilled job offer from the UK, and you do not belong to the Switzerland or the European Economic Area (EEA). However, the employment offer has to be via a licensed and registered sponsor. In the Tier 2 category, expat contactors are allowed to take an additional job (under certain situations), do volunteering work, pursue education (provided it does not clash with the sponsored job) and even travel.
Moreover, citizens of Commonwealth countries can legally work and live in the UK as expat contactors under the UK ancestry system. To be eligible to apply for visa under this category, applicants must be Commonwealth citizens, should be capable of financially supporting themselves and their families and should also be able to attest that any one of their grandparents was born in the UK, or on a British-registered ship or aircraft.
The economy of the UK faces skills shortage in the IT, engineering, healthcare and creative industries, among others, which has presented several employment opportunities for skilled expat workers across all disciplines. This makes the UK expat contract market highly lucrative and sought after. The UK government has made it mandatory, under the Resident Labour Market Test that all skilled jobs are first to be advertised to EEA citizens for a fixed period of time before being passed on to Tier 2 workers.
Moreover, the UK government, on a yearly basis, circulates a list of occupations wherein employers are finding it difficult to hire the correct talent and skills. However, it is not mandatory that these jobs be advertised to EEA citizens before being passed on to non-EEA expat contractors. For these jobs, there is also no need for the expat workers to take the Resident Labour Market Test. The only requirement is that the job should cover at least 30 hours on a weekly basis and pay a minimum wage for qualification. The shortage occupation list is published for the UK as well as Scotland, and the Migration Advisory Committee (MAC), the government body that monitors the skills shortage in the UK, regularly updates the requirements on the website.
After winning your first contract, you can officially start trading and charging your client to receive an income for the same. However, you would need to have access to a legal entity or trading vehicle to start charging your client, who would usually be a limited or an umbrella company. Moreover, you will have to open a business and a personal bank account to receive income from your contracting job. The opening of bank accounts can be time consuming; therefore, it is advisable that you start the process as soon as your contract starts.
Contracting and Tax Efficiency
Tax benefits is one of the main advantages of contracting in the UK. It enables expat contractors to save more by paying less tax and receiving more net income. There are several calculators available on the government’s Contractor Calculator website where you can work out how much you can earn in the UK as an expat contractor. There are also several other calculators available that contractors can use to plan out their accounts and finances. From the taxation point of view, it should be remembered that contractors are not regular employees. They are hired on a fixed term contract (which may be extended), a specific project for which the contract has been signed and agreed wages. Typically, contractors are hired to work for UK companies via agencies. Therefore, some of them may come under the IR35 ambit, and if they fail to comply with IR35, they may be fined 25% of their income as penalty.
Choosing the pay options
It is important to know the difference between getting paid as a sole trader, starting your own company or getting paid through an umbrella company. Whatever you choose it is important you decide on one before getting into a contract.
Selecting an umbrella company means getting paid through a recruitment firm as they treat you as their employee and take care of your payment and tax obligations. All you need is a bank account and related formalities which is easier to be done.
As a sole trader while there may be initial hiccups to set-up tax and bank accounts but overall it helps in generating better profit as you get to deal with the payer directly.
If you don’t fall under IR35, you can become the sole director of your firm and get benefited from tax as well as getting a better profit compared to being part of an umbrella company. You have better flexibility in choosing work as the shareholder of your own limited company.
The Migration Advisory Committee maintains the data on any skill shortage, the related skill’s vacancy rates, dynamic pay scale and lastly the employer’s perception towards skills shortage. It is advised that you keep an eye on vacancies that have been open for a while as often IT related skills are under shortage for a longer period of time. An individual can apply for such openings under the tier 2 visa.
Here is the link to apply for such jobs. Once you get an initial contract and stay in the UK, you should evaluate options to get on a contract that gives you a better tax benefit.
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