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Expert answers: How do I go about proving to HMRC that tax has been deducted?

Readers Question: Just completed my first “job” as an LTD company, providing professional services. The work was done over a 4 month period in New Zealand and my invoice was submitted to a 3rd party UK agency, net of 15% New Zealand tax. How do I go about proving to HMRC that tax has been deducted and also how to pay the balance of 4% tax owing?

proving to HMRC that tax has been deducted

Expert answer: The expert is Mike Phillips from Its International, providing an explanation of the international tax differences.

You carried out a fixed-term contract in NZ (New Zealand) through your UK limited company.  I presume you lived and also worked in NZ for less than 183 days in a 12-month period.   This scenario makes you non-resident, liable for NZ income tax on your NZ-sourced income as the employee of your company. However, as the director, you may have been directing the company and managing it on a day-to-day basis during your stay in NZ.  This could mean your company has a permanent establishment in NZ requiring it to register its presence there and potentially to submit a corporate tax return to the NZ tax office.

Did you take advice from a regulated UK accountant and an NZ accountant before taking the contract?

For example, how was the 15% NZ tax deducted by the agency?  If it is offsetting its own withholding tax liability this could become a double benefit to them, at your expense.  How can you be certain their deduction is mitigating 15% off your company’s liability?  This sounds unusual.

Your question raises many more questions which are best covered through a direct face-to-face discussion. If you wish to discuss further feel free to get in touch.

More on ask the experts and limited company tax.