If contractors and project freelancers are in limbo over their IR35 status, disheartened by umbrella company fees, being replaced by overseas contractors and lower take-home pay, should they seriously consider repatriating to markets such as Spain?
We explore the challenges met by project freelancers and contractors and how they may look to turn challenges into opportunities by moving abroad for a couple of years or even longer.
Arguably, IR35 is limiting access to experienced talent in the UK’s critical infrastructure sectors of engineering, construction, health, financial services and cybersecurity. UK contractors that want to run under a limited company structure feel like they are between a rock and a hard place.
Challenge 1: PSC contractor ban
UK contractors are being banned by big hirers because of IR35 rules. That means that UK contractors in the past year have either ended up with dramatically reduced pay as full-time employees or are replaced by offshore workers so hirers can avoid IR35 complexities.
Many contractors have been hesitant about going on the payroll, because of pay cuts and fears of being unfairly stung with retrospective tax bills that could crop up unexpectedly.
Companies that were once big hirers of UK contractors, such as Infosys, the India headquartered IT consulting business owned by Chancellor Rishi Sunak’s in-laws, are telling the UK government what they want to hear: more jobs in the UK will be created.
Infosys has said it plans to hire 1,000 graduates from UK colleges and universities over the next three years, which is a “vote of confidence” according to PM Boris Johnson.
Salil Parekh, CEO, Infosys, said in May at the time of the recruitment drive announcement, that the company will make these hires to establish “a robust future workforce” and be a part of the “UK’s economic recovery”.
However, this probably won’t help experienced contractors.
Challenge 2: Replaced by short-term visa hires from abroad
Some contractors have their doubts that this type of job creation will benefit the British purse 100%.
One London finance contractor told efinancialcareeers that a lot of their domestic Indian contractor friends are talking about how IR35 is “encouraging a shift away from domestic contractors in favour of companies like Infosys that have roles that are either being offshored to India or filled with “freshies” (recently arrived Indians who work on short term visas).”
Will the new Infosys recruits be British citizens and British taxpayers? Will they be foreign students that have come to study at UK universities and then hired to work on short-term visas? There’s nothing stopping foreign graduates or even hiring companies from doing this so why would they not equally take advantage of the opportunity?
That said, being replaced by international contractors on short-term visa contracts on much lower pay is nothing new and just another challenge that works against the UK’s economic recovery.
With remote working now more accepted due to the international lockdown measures, international students that have worked in the UK on short-term visas can return to their home country as contractors and potentially continue working on a remote basis.
Challenge 3: Foreign hirers can’t hire UK contractors
If a UK contractor wanted to work for foreign companies while still living in the UK, the foreign companies are disincentivised to use UK contractors because they have to set up UK operations. They would also probably have to hire them as an employee, which defeats the purpose of hiring project contractors. The same, however, does not always hold for UK companies wanting to outsource foreign workers or remote workers.
Challenge 4: IR35 status limbo
Increasingly, many contractors and freelancers are in IR35 limbo, as previously reported by The Freelance Informer.
New data has exposed the flaws of HMRC’s Check Employment Status for Tax (CEST) tool, used by businesses to determine the IR35 status of contractors. The figures (available here) show that between 25th November 2019 and 31 May 2021, CEST was used 1,018,250 times, delivering the following results:
– 499,974 were deemed outside IR35
– 308,176 were deemed inside IR35
“I’m astonished that the government still stands by an IR35 tool that hasn’t been able to make up its mind over 210,000 times,” said Qdos CEO, Seb Maley.
Is remote working abroad a viable long-term option?
Anyone who can work remotely and work independently as a contractor outside IR35 may consider moving abroad. Many startup founders and freelancers are moving to markets, such as Spain where they can apply for a Golden or non-lucrative residence visa. These visas are very different and require specific proof of economic means, but do allow you to bring relatives and independents.
What is a Non-Lucrative Visa in Spain?
A non-lucrative residence visa is a unique type of residency permit in Spain for non-European citizens who would like to reside in Spain, but not carry out any economic and professional duties with companies in Spain. Remote working for UK or non-Spanish companies would be allowed.
The non-lucrative residence visa is a popular choice for most ex-pats since it does not require an investment in Spain. However, the applicants must prove their financial capabilities of supporting their stay in Spain for at least one year without working for a Spanish company, according to myspainvisa.com
After the initial year of residency in Spain, this visa is subsequently renewable every two years, however, anything over 5 years may mean people may want to consider applying for a permit to become a Spanish permanent resident. Tax implications would change though.
Can you bring dependents over on a Non-lucrative Visa?
The non-lucrative residence visa, according to myvisaspain, allows you to bring your family members so long as you can have enough money to sustain them if they are not of working age for one year.
Throughout 2021, for monthly support, you must prove that you have €27,115.20 in your account, or that you receive a minimum monthly income of €2,259.60. For each dependent, you must, however, provide a further €6,778,80/year or €564.90/month.
Myvisaspain on Economic Means required for a non-lucrative visa in Spain
Official documents required to prove your sufficient economic include payslips, bank statements, state or government pension, pension scheme, or possession of any assets that guarantee your income.
A mandatory interview will be held at the consulate office, which will go towards the decision on the visa. All official documents must be legalised through your consulate representative, or with the Hague Apostille. Documents will need to be translated into Spanish by an officially accepted translator. The consulate should be able to suggest one. Legal firms that specialise in British expats relocating to Spain can also often provide this service.
What is a Golden Visa in Spain?
If you want to move to Spain and acquire residency without being limited by a mandatory period of stay, then the Golden Visa/ Investor Visa may be your best bet then.
According to different sources, this permit allows you and your relatives to live and work legally in Spain without the need to visit the country more than once a year. This visa also allows you to move freely within the Schengen Area. To obtain such a visa you must be a citizen outside the European Union and realise a significant investment in Spain.
The Entrepreneurial Support Act (Law 14/2013) of 27 September 2013, also makes it possible for non-EU nationals to obtain a Spanish Residence Visa and subsequently a Residence Permit if they make a significant investment in property in Spain with a purchase price equal to or higher than €500,000.
Solicitors in Spain
The Residence Visa is granted for a period of 1 year. The holder of the Residence Visa is entitled to apply for a 2-year Residence Permit that can be renewed provided the investment is maintained and the holder has made at least one visit to Spain during the Residence Visa period.
An application for the Residence Visa will be processed at the Spanish Consulate in the country in which the non-EU national is currently residing, or in his/her country of origin.
Who has to apply for the visa or residence permit?
The investor or his/her legal representative must apply for the visa or residence permit via the application form.
It is important to distinguish where you are at the date of application to know if you will apply for your Investor Visa or your Residence Permit:
- AN INVESTOR VISA, if you are outside of Spain when the application is submitted. Visa applications must be made at the Spanish Consulate in the country of origin or residence. Residence permit applications must be made at the Large Business and Strategic Groups Unit (Unidad de Grandes Empresas y Colectivos Estratégicos (UGE-CE)).
- A RESIDENCE PERMIT, if you are currently in Spain when submitting the application. Residence permit applications must be made at the Large Business and Strategic Groups Unit (“Unidad de Grandes Empresas y Colectivos Estratégicos” (UGE-CE).
Can family members benefit from the main applicant investment?
Yes, they can also apply for a golden visa if they are any of the following:
- The spouse or unmarried couple (“civil partner”)
- Children who are minors or those of legal age being financially dependent on the holder.
- Parents in their charge.
Tax in Spain for non-residents
If you live in Spain for less than six months (183 days) in a calendar year, you are a non-resident and only pay taxes on the income from Spain, according to Expatica
“Taxes apply to your income at flat rates with no allowances or deductions. If you are a non-resident and own a property in Spain, whether or not you rent it out, you will need to submit a tax return and pay Spanish property taxes for non-residents (or imputed income tax on your property) as well as local Spanish property taxes.”
Anyone moving abroad should check with a UK tax specialist or accountant to understand where you will stand on UK taxes if living abroad and also a Spanish tax specialist if you plan to make a living while working remotely there.
For more information on visa process:
Non-Lucrative Residence Visa in Spain: Documents + Requirements (balcellsgroup.com)
Applying for residency in Spain – the “Golden Visa” | Solicitors in Spain
I’m thinking on moving to Spain. Nice information. Thank you.
This line is not entirely correct:
“What is a Non-Lucrative Visa in Spain?
A non-lucrative residence visa is a unique type of residency permit in Spain for non-European citizens who would like to reside in Spain, but not carry out any economic and professional duties with companies in Spain. Remote working for UK or non-Spanish companies would be allowed.”
You quote myspainvisa.com, yet their website says this:
“The non lucrative visa is an entry permit to enter Spain for residence purposes without working, therefore with the NLV you cannot work anywhere, only live on savings or passive income such as dividends, pensions or rents. If you want to work remotely you can check the nomad digital visa in Spain.” However, the nomad digital visa hasn’t yet been passed into Spanish law.
Mark,
This is very useful as many UK freelancers might like to try out what it’s like living in Spain while continuing working with their non-Spanish clients. I do believe though that freelancers would still have to claim UK-based income but it’s fuzzy when it comes to IR35 if you are living abroad but working for UK clients.
If you are living in Spain are you meeting many British freelancers and if so are they choosing inside or outside IR35 opportunities?