Freelancers’ Questions: Can we move to France, and move to freelance?

Freelancer’s Question:

We are looking at the pros and cons of not only relocating to France from the UK, but of switching our status from the end-user’s PAYE staff -- which we are now -- to freelancers.

So, is it permitted to have a French address for correspondence and other business purposes if you are a freelancer in the UK, or would we need a UK address? Conversely, but also as a UK freelancer, can you have your business address in France or must it be in the UK?

Expert’s Answer:

Before addressing the logistics, practicalities and requirements concerning your envisioned relocation to France, you should be aware of the risks involved in becoming a freelancer for a company which you were previously PAYE for.

What HMRC might very well ask you

One of the first questions HMRC asks in any IR35 review is: ‘have you ever previously been an employee of the company?’ The tax office then will want to know how the role or duties as a freelancer/contractor differ to that of when the individual was employed. If they don’t differ by a considerable amount, then the Revenue will look to say the contract is caught by IR35. That would result in a potentially hefty tax liability for you and the end-user. It’s a potential liability which HMRC would assess as owed from the very start of the ‘freelance’ engagement between you and the company.

Are you ready for (IR35) risk?

So if the terms of your contract and the working practices haven’t changed significantly, then switching from PAYE to freelance is a risk, from an IR35 compliance perspective. As well as asking ‘have you previously worked for the engager/end client?’, the Revenue always then asks,‘If so, how does the role differ to that of when you were employed?’

A quick read of your question suggests French law, and not UK law under which IR35 operates, might apply, But please note, if you pay tax here in the UK through a limited company, IR35 will apply, irrespective of whether your client is based on these shores or overseas. Only if your company is registered in France, would IR35 not apply, given that the Intermediaries legislation is UK-specific. Likewise, be aware that even if your business address is located in France, but you operate a UK registered company, IR35 is a consideration.

A French address is indeed possible. But is it efficient?

As to that French address, you can have a French address for correspondence as presumably the registered office for the limited company would be in the UK and could be somewhere such as your accountant’s address. Obviously, the issue that may arise is the delay in receiving correspondence if you are working in the UK but your correspondence address is overseas! So the short answer to your question about whether it’s permitted, is ‘yes,’ if the registered office for the business is in the UK, you can have a business address in France -- if you so choose, but bear in mind the practical issues this may give rise to.

My recommendation is as follows. If you are still liable to UK tax and working in the UK, then having a UK business/correspondence address would be the most convenient in terms of receiving correspondence, as correspondence from HMRC consistently takes a considerable amount of time (sometimes weeks) to be received from the date HMRC originally posts it. Anything you can do to reduce the delay in receiving correspondence can only assist your business. Best of luck!

The expert was former tax inspector Nigel Nordone, head of tax at Qdos Contractor.