international, accounting, freelancingHow can a company make sure that an invoice it takes is valid to declare as an expense ? Specifically, we can consider a UK limited company, that pays freelancers for programmer and video filming activities (both are done outside the company’s country, in this case UK).
What will happen for example if the freelancer gives an invoice, get paid from the company bank account to his account, but the invoice is not declared in his country ? Is there any problem for the company that hired the freelancer for the project ? (Like the invoice not to be a tax deductible cost).
I would think, that as long as the freelancer and your company are is "at arm's length", and the expenses are a deductible business expense.
If there is lack of "arm length" distance, then there could be some financial and/or legal liability.
Deductible expenses are a bit tricky but this phrase (from a UK point of view for your company) I find helpful... (It is extracted from this larger article)
All revenue (trading) expenses must have been incurred “wholly and exclusively” for the purposes of the business to be allowable for tax purposes. This means that the costs must be incurred while actually performing the business or trying to attract more business. There are special rules for pre-trade expenses.
As much as it is unfair if the freelancer doesn't pay their local tax, it is down to them and I would expect as long as you keep good records of the freelancer that should be sufficient for your company.
For my company, we tend to use UK registered companies or UK sole traders, but we ensure they have the right to work in the UK, so we are as legal as possible.
If you are worried, get some advice from an accountant that has international experience.
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