Foreign self-employment

Produced by Tolley

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Foreign self-employment
  • Is there an overseas operation?
  • Income tax
  • Generally
  • Moving overseas
  • Transferring assets
  • Capital gains tax
  • National insurance contributions (NIC)
  • Basic rule for Class 2 NIC
  • Displacement of the basic rule
  • More...

Foreign self-employment

Trading in another jurisdiction involves many issues, only some of which involve taxation. Advice should be taken, not only in relation to tax but on the wider business implications.

This note deals in broad outline with the tax issues facing a self-employed person who is trading overseas. It then considers some issues that are specific to partners.

The tax regime in the overseas country is also very important. Its specific rules, and the ways in which the two systems interact should both be explored before decisions are taken. This note does not discuss any tax issues that might arise in other jurisdictions.

Is there an overseas operation?

A sole trader or partnership that is based in the UK and merely sells goods or services to customers overseas is not normally subject to foreign taxes on profits. To be taxable there must generally have a permanent establishment. Different rules may apply for VAT, see below.

A permanent establishment is usually either a fixed place of business in the overseas country, or a ‘dependent agent’. A dependent agent is one who habitually exercises authority to do business on behalf of the UK enterprise. The meaning of permanent establishment is discussed in detail in the Permanent establishment guidance note.

If the UK business has premises overseas that are used only to store or display goods, or to hold them pending delivery or processing, this does not normally constitute a permanent establishment.

These definitions and requirements are drawn from articles 5 and 7 of the OECD model tax treaty, which forms the basis for most double tax treaties. A list of treaties can be found on the GOV.UK website.

Income tax


A UK resident and domiciled or deemed domiciled individual is taxable on their worldwide income. This is known as the arising basis of assessment. For an explanation of these terms, see the Residence ― overview and Domicile guidance notes. Worldwide income clearly includes profits from trading in other jurisdictions.

Individuals who are not domiciled or

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