Independent contractor in HK for a UK company - Help Needed

[Rach32]

HELP!!!
I am ever so confused right now as to what I need to do.

I am born in HK but have never worked in HK. I have always lived in the UK. Have been working as a perm staff for my UK employer for few years. Due to some personal circumstances, I am currently working in HK remotely for the same employer but will be switching to be an independent consultant. I believe I will need to starting paying HK tax instead of UK tax.
What's my first step to take from here?? Is it compulsory to get an accountant? Should I get paid in GBP or HKD? Should I set up a Ltd? If someone who know how it works help me please!
MUCH APRECIATED!!

[vmlinuz]

I can't give you a complete answer, and I have to say that I never quite worked out if this was the best, or in fact the most legally-correct thing to do, but...

I registered as a sole proprietor business many years ago, and have done a bunch of random freelance work via that registration. The full annual fee for registration is around $2500-$3000, but they often reduce that as part of their random annual tax manipulations. I only ever billed and got paid under my own name, not the business name, so I just got cheques or bank transfers paid into my personal account. On the HK tax return, I put my income down as business earnings, but I actually got two tax bills each year, one as a business and one as an individual, where I only had to pay whichever was lowest. One thing I did which I know was not legal, but was never queried, was skipping MPF - technically if you're self-employed, you're meant to sort it out yourself, but nobody seemed bothered that I didn't bother...

I also never bothered with an accountant, but I also never really made an effort to be tax-efficient. Given how low the taxes are in HK, it barely seemed worth it...

As for getting paid, depending on how flexible the company in the UK is, they could possibly pay you into a UK account, assuming you still have one, and let you transfer the money yourself - or you could look into getting paid via something like wise.com. If not, you could always just let them pay you by TT/SWIFT, which would generate some small fees. I can't really comment on that sort of thing, since I always worked for HK clients.

[Desmond Decker]

Hi,
I am a British freelance contractor based in Hong Kong. You will need to pay Hong Kong tax on consulting fees earned in Hong Kong. I incorporated a HK private Limited company and employ myself through my company. The decision to incorporate or to do business as a sole proprietor, like vmlinuz, depends on your circumstances, but my hand was forced because my clients want to do business with a company rather than with an individual.

If you incorporate, you must get a Hong Kong CPA to audit your company's books annually. There is no exemption granted to small businesses, unlike in the UK.

If you have the choice to invoice your fees in HKD or GBP it's still a difficult choice to make! My clients generally choose the currency of the contract. GBP probably has room to appreciate from its current level of around 9.50 HKD, but if you receive fee income in GBP you will always have the inconvenience of needing to convert it before you can spend it in Hong Kong.

You can send me a DM if you would like to have a voice call.

[Wai33]

It is cheaper not to hv a Ltd company as auditing is about $6,000 per year.

[Rach32]

Thank you so much Vmlinuz, Desmond and Wai for the advice!

I think Vmlinuz's approach is something I can follow, at least get me started with.
Going forward, I will be spending time between HK and UK, is there any restrictions on how long I stay in each country for tax reasons? Is there anything else I should be aware of registering as a sole proprietor in HK?

[aw451]

Choose where you want to pay tax and incorporate the company there and spend more than 50% of each tax year there.

[Rach32]

Hi again, does anyone know if there is any conflicts if I pay and declare tax in HK, get paid into my UK bank account and I do my own transfers?

[aw451]

Are you a company or sole proprietor in this scenario and why are you getting paid into a UK bank account?

[Beanieskis]

If you remain employed by a UK company I don't think the HK IRD will have any interest in your UK salary. Do you have to set up an HK company and become a consultant? I think in that case you will need to pay profits tax.

[Beanieskis]

Thank you so much Vmlinuz, Desmond and Wai for the advice!

I think Vmlinuz's approach is something I can follow, at least get me started with.
Going forward, I will be spending time between HK and UK, is there any restrictions on how long I stay in each country for tax reasons? Is there anything else I should be aware of registering as a sole proprietor in HK?

Yes there is a restriction on how long you can spend in the UK. If you are still basically employed by a UK company (and UK law doesn't really recognise independent contractors if it's really an employment relationship), then the number of days you can spend in the UK before paying tax there will be much lower than if you were employed by an HK company.

You definitely need to speak to a UK tax advisor before you commit to any arrangement. Find one who is used to dealing with people who are employed in the UK but are non-resident - for example one who has a lot of UK pilots as clients.