≡ Menu

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.

Hiscox Business Insurance
Pay with monthly direct debits