Reducing cotisation payments

[keith]

Unlike a lot of people who move over to France, I'm still a wage slave, a software engineer working for a UK company remotely and paying all my tax and cotisations here in france. The way the french government handle this is to set me up as a sole representative of the UK company and make me responsible for the employee's and the employer's contributions.

Having been here permanently just over a year, I've discovered, that while my tax bill is considerably less than it would be in the UK, my cotisations more than make up for it, causing me to lose around 60% of my salary in stoppages.

Now the company I work for is fairly flexible on how they structure my salary,  so I'm wondering if there are any legal ways that they can pay me, such that I can reduce my URSSAF bill as 60% is just ridiculous.

My accountant suggests registering as self employed which apparently saves around 16%, but the risk there is that to do this legally,  I need multiple clients and although I do odd bits of programming work for other people, the government agencies may decide I'm not self employed as I'm receiving a regular income. 

So any suggestions on how to reduce my social charges?

[Eslier]

Rather than looking at how you can pay less in France, why not look at how you could earn more from the UK. As your UK employer is effectively paying you against invoice, your employer is saving a considerable amount on UK employers NI contributions, whilst your salary still remains 100% tax deductable. Why not calculate what this amount would be and ask your employer to increase the amount you are paid by an equivalent amount. Your employer won't be any worse off than if you were UK resident but you will get some extra help towards your French cotisations. Seems only fair !

[keith]

Actually my UK salary is already grossed up to cover the cost that my employer would have had to pay if I was working in the uk.  However it goes nowhere, compared to what I have to pay in France.

I ought to stress that it was my choice to live and work in France,  if he was given the choice, my employer would prefer me to be in the office in the UK but he wanted me to work for him enough to allow me to work remotely in France.  This is why he is flexible on how to pay me my salary (and it is a salary not an invoice) - although he has a fixed budget (made up of my uk salary plus what he would pay in employer's contributions), he is willing to split it any way that helps reduce my costs.

Regards

Keith

[bejay]

Investigate this

Set up a UK registered  Limited Company. To my very certain knowledge this is very common practice among IT specialists and is easy and cheap to do.

Set  your salary at the minimum level that the french tax regime will work with, the rest of your income is in the form of dispersible dividend and will be taxed in the UK at business  rates.

As always the devil is in the detail and it may not be worth doing but it must be worth checking out as it is a well recognised tax efficient procedure in the UK.

I would be very interested to hear if anyone knows of a fatal flaw in this procedure

bj

[keith]

I think that just moves the problem - I'll need to become a sole representative of the uk ltd company instead of a sole representative of  the existing company in London.  And I'll be taxed and French NI'd on the dividends and as far as I know (I'm not sure though),  the cotisations on dividends are more than on salary as it's regarded as unearned income.

What I really need is some kind of productivity bonus or profit sharing scheme that attracts reduced social payments - anyone know of one?

[Quillan]

[quote user="bejay"]

Investigate this

Set up a UK registered  Limited Company. To my very certain knowledge this is very common practice among IT specialists and is easy and cheap to do.

[/quote]

He would loose out because he is working primarily for one employer and would definatly come under the UK IR35 rule and would be worse of as he would have to pay both employers and employees NI and would get no tax relief what so ever. One of the reasons why many of us (computer contractors) gave up working in the UK.

[Iceni]

Di and I worked for our close company for around 10 years in various IT roles. Di was OK but I MIGHT have fallen under the IR 35 rules though I was made redundant in early 2002. Just after moving out here permanently in Nov 2003 our comapny received the dreaded letter from HMIT wanting details of all contracts etc etc. Replied saying that both directors and all paperwork now lived in France - what arrangements will you make for coming out here ? They backed down, NFA.

Perhaps by coincidence the expenses recorded on my P11D for 2000/2001 had been thoroughly investigated in 2002. HMIT wanted to know chapter and verse on every item - as I had been commuting on a weekly basis to Farnborough the total amount was large and there were lots and lots of little bits. But on that occasion they were trying to catch me under the 2 year rule.

These cautionary tales are neither intended to encourage or discourage a particular course of action - just to remind people of the powers of HMIT and possible length of their arms. With persistent rumours of information exchange between UK and France tax authorities be careful out there.

John

not

 

[bejay]

Thank you gentlemen for dealing with me so gently and patiently! I did submit the post with some trepidation but I was interested to see what reaction it generated..

Keith.  It it was the french treatment of UK taxed dividend from a UK company that intrigued me (and still does). I did just wonder if there was some room for manoeuvre there but if what you say is correct then my suggestion would simply be more pain for no gain.

I do hope you find some way of  reducing your payments, as you say 60% is just ridiculous.

bj

 

[Jo53]

You could investigate working for a French 'societe de portage' - basically an umbrella company designed for consultants and freelancers. You are employed by the portage company, who bill your client and pay you after deducting cotisations and taking a % themselves. They do all the paperwork for you, and it is legal and above board. I have read about them in business magazines (eg L'Entreprise - see their excellent website if you read French, lots of information. If you subscribe you get access to premium content and an advice line - I found it worth the 30-odd euros for 6 months). I think you end up losing about 50% through a portage - horrible, but better than 60%). Obviously you'd need to shop around and make sure the societe de portage is reputable and well established.

Best of luck

Jo

[Babnik]

Keith,

it's uncanny, but I'm exactly in the same position as you. I actually had to check my passport to see if my middle name wasn't Keith!!! I, like you hate the fact that I have to pay around 60%. At least I know I'm not the only one! I was always afraid I was paying too much, and there had to be a mistake. If you have any ideas, please let me know!

[eurosnugs]

Hi,

I was in a similar position.  I am a quality systems auditor.  I have gone down the portage route.  It was a lot easier than I thought.  I basically get 50% net of the amount that I invoice my customers.  The other 50% that is taken off pays the portage companies commission, charges patronale + my charges sociale (statut sociale cadre). 

The portage company I work with gives me my salary at the end of the month and then works on getting the money back from the customer so I know I am going to get paid.  Of course my customer is my old uk employer so there is no problems with them paying regularly.

 There is one big catch, in order for me to have a net salary in France similar to the one I used to have in the UK, my employer would of had to increase my gross salary by about 40%.    After some negotiation we settled on a 20% increase so I get less each month but of course my income tax is less + I put less into a private pension due to the French national pension scheme being better than in the UK.  I also worked out the amount that my company used to pay me for private health in the UK and got them to add this to my salary as the French health system is so much better. It took me about two years to sort all of this out after a lot of time on the net and talking to different people.

I looked at going down the setting up my own business route.  I worked out that I could be 10% better off a month but why not spend an extra day a month working and getting paid for it rather than wasting that time at home with mountains of French paper work and having to pay the accountant.

 

Good luck

 

Jason 

[Albert the infopikey]

eurosnugs wrote

"  The portage company I work with gives me my salary at the end of the month and then works on getting the money back from the customer so I know I am going to get paid.  Of course my customer is my old uk employer so there is no problems with them paying regularly.

 There is one big catch, in order for me to have a net salary in France similar to the one I used to have in the UK, my employer would of had to increase my gross salary by about 40%.    "

I'm a UK-based (currently) IT consultant and only take contracts that fall outside IR35. As a rough guide, the generally acepted rule of thumb for rates is that a contractor's hourly rate is roughly equivalent to a permanent employee's annual salary divided by 1,000. That works out to about a 60% higher yearly rate by the time you allow for unpaid holidays, etc. All my clients have been prepared to pay this sort of premium to get the right people when they need them.

This doesn't mean that the contractor gets all this lovely money -- you have the costs of running a business, paying your own travel & lodging (£1,000 a month on my last contract) if working away from home, professional insurances, no income between contracts...

All this to say that if your old employer is reluctant to pay 40% extra to cover the reduced cost of having you in the office as well as not having to pay NI etc. then maybe you need to look around.

[keith]

Well,  we're going to be talking to the accountant next week about whether setting up the french company is really going to save me money,  or just leave me caught under the french equivalent of IR35.  I'll let you know what happens. 

Although on the surface it does appear to do so,  there are some complications - like the uk company now want to make me a shareholder!

[Daley]

    Hi Jason

I read your entry with interest as I am looking to move to France in a couple of years time to start a B&B, but also realising that I will need to continue to work whilst my wife works on making a success of the B&B.  I have a job as a Corporate Assurance Manager for Europe, which also means I do audits of systems including quality systems.   Now to my question, where do you do your auditing? in France or returning to the UK?  Who pays for your travel and accommodation? Of course you are not obliged to answer these questions, but I would like to propose to my employer a UK company here in Germany, that I also work from home and that of course could be anywhere.

Any advice would be appreciated.

Cheers

Dale

[mickey jim]

I'm in a similar situation; I live full time in France, but I have been offered some part-time work with my ex boss in the UK.  I'd looked at the route of setting up a business in the UK but have been advised that this is not a good idea, for the reasons already mentioned in the postings above.  My Accountant (UK) has advised that I get employed by the UK company and pay tax/social charges in the UK.  My husband already has a Micro Enterprise in France so I'm covered 'socially' by him pay his cotisations. So, my question is, does anyone know whether getting paid and paying taxes in the UK, means that I will get clobbard in France too (ie paying tax etc twice)? Or can I just declare it on our French tax return form stating that I've already paid tax and everyone's happy??. 

[Babnik]

You can't choose where you pay tax and social charges, but it depends on various factors such as where you are resident and where the work is performed. If you are resident in France, and do the work in France, then I'm afraid you pay tax and social charges in France.

[lel]

Can you tell me is your tax then paid extra after this or does the portage pay everything?

[BJSLIV]

As always the tax is a matter between the individual and the revenue (no PAYE in France!)

So tax may be  payable on any money received from the portage compan, depending on total income and allowances.

[walt]

I am considering moving to France whilst still working for my UK-based employer. Some of the work will be done in the UK at client sites and some can be done from home in France. I guess a likely split between UK/France work might be 50/50. Can anyone advise what implications this may have with regards not only to my but also my UK employers tax and social charges position?