Why can’t I continue paying taxes through my Limited company?

Tax is due where income is earned. If you are contracting abroad, you need to ensure that you have a mechanism by which income tax can be paid in your country of work.

By continuing to pay tax through your Limited company, you will be remitting tax in your home country, but not in the country where you are working. Although your tax affairs at home will be in order, under this type of arrangement a tax liability will build up in the country of work. In many countries there exists a chain law which means that the tax liability can be passed on to the client you are working for. For this reason, many clients will insist that contractors are paid via an in-country payroll.

The 183-day rule does not apply in situations where a one man Limited company is the employer. As soon as the director of the company moves, the permanent establishment of the company moves with him. Contractors operating through UK Limited companies outside the UK are consequently running the risk of being liable not only for unpaid personal income tax, but also for corporate tax, having created a permanent establishment in the country where they are working.