Self-employed for 2 foreigner clients, tax issues?

[blackjoe24]

I've started freelancing since the beginning of this tax year. I have 2 clients, one in US and one in Japan. I work up to 30h per week, mainly for the US client. I'll make over 6 figures this tax year.

At the end of the tax year, I was just going to submit a self-assessment as a sole trader and then pay whatever income tax is due. However, I have started to read information about IR35 and self-employed contractors being classed as employees. It's all quite confusing!

Any tips on whether I am doing something illegal here? I suppose my next step is to seek professional advice.

[SuperLooper]

Seek professional advice.

IR35 is only a consideration if you're operating through a Ltd company.

[cojak]

Take a look at the First Timers guides here: https://www.contractoruk.com/first_timers

And whether your a self-employed freelancer or need to go Ltd, join IPSE https://www.ipse.co.uk

[TheGreenBastard]

I've started freelancing since the beginning of this tax year. I have 2 clients, one in US and one in Japan. I work up to 30h per week, mainly for the US client. I'll make over 6 figures this tax year.

At the end of the tax year, I was just going to submit a self-assessment as a sole trader and then pay whatever income tax is due. However, I have started to read information about IR35 and self-employed contractors being classed as employees. It's all quite confusing!

Any tips on whether I am doing something illegal here? I suppose my next step is to seek professional advice.

- 6 figures = go Ltd
- IR35 - unlikely a concern for you with exclusively foreign clients
- seek professional advice (do you have an accountant?)

[Lance]

- 6 figures = go Ltd
- IR35 - unlikely a concern for you with exclusively foreign clients
- seek professional advice (do you have an accountant?)

I agree with this..... but it's important for the OP to understand that if he's not using a LTD now he cannot backtrack that income.
Also if the OP is self-employed (sounds like it if not LTD) then he should have informed HMRC some time ago.

So definitely get professional advice. If you started after April 2017 then it (the tax) is not due till January 2019 so you have some room to breathe, notwithstanding that you need to sort out the best structure IMMEDIATELY.

If you started before April 2017 then you have less than 30 days to sort this out.....

[TheCyclingProgrammer]

Also if the OP is self-employed (sounds like it if not LTD) then he should have informed HMRC some time ago.

OP said the beginning of this tax year so they have until next October to notify HMRC. If it was the previous tax year then technically they are 3 months late in notifying HMRC but no penalty for this as long as a tax return is submitted by the end of Jan.

I agree with the advice that tax wise going forward OP might be better off incorporating but only working for foreign clients doesn’t make you completely immune from IR35, especially if you are working like an employee so it still needs considering.

Whilst not tax efficient, at least OP doesnt need to think about IR35 at all right now.

[blackjoe24]

I agree with this..... but it's important for the OP to understand that if he's not using a LTD now he cannot backtrack that income.
Also if the OP is self-employed (sounds like it if not LTD) then he should have informed HMRC some time ago.

So definitely get professional advice. If you started after April 2017 then it (the tax) is not due till January 2019 so you have some room to breathe, notwithstanding that you need to sort out the best structure IMMEDIATELY.

If you started before April 2017 then you have less than 30 days to sort this out.....

I started out self-employed after April 2017 and did inform HMRC.

Sounds like switching to a Ltd may be the way to go. Any tips on accountants to go with?

Thanks for the replies everyone!

[jamesbrown]

In terms of incorporation, I'd be less worried about tax efficiency in this situation (it really depends on whether the OP wants to accumulate money in a company to defer tax because the advantages of incorporation disappear otherwise) and more worried about the exposure of working for US clients as a sole trader. Not something I would consider, even with decent PI insurance.

[WordIsBond]

In terms of incorporation, I'd be less worried about tax efficiency in this situation (it really depends on whether the OP wants to accumulate money in a company to defer tax because the advantages of incorporation disappear otherwise) and more worried about the exposure of working for US clients as a sole trader. Not something I would consider, even with decent PI insurance.

This. Especially if the contract is under US law. It's a little less dangerous if he's using an English (or Scottish) contract. His client may be his best mate but even so, why take risks?

I'd be very surprised if there is much risk on IR35 here. Multiple clients, foreign clients. If they want to go after an IR35 case with a foreign client to establish a precedent, they'll go after someone with a single foreign client who was formerly their employer and who did the classic Friday/Monday scenario. Unless you have stupid stuff in your contract, or unless you don't have any functioning brain cells when they ask you about it, it will be impossible for them to prove your working practices put you inside, since they can't force the client to talk to them about you. And US clients probably won't talk to them voluntarily.

[Andrew@Wisteria]

This. Especially if the contract is under US law. It's a little less dangerous if he's using an English (or Scottish) contract. His client may be his best mate but even so, why take risks?

I'd be very surprised if there is much risk on IR35 here. Multiple clients, foreign clients. If they want to go after an IR35 case with a foreign client to establish a precedent, they'll go after someone with a single foreign client who was formerly their employer and who did the classic Friday/Monday scenario. Unless you have stupid stuff in your contract, or unless you don't have any functioning brain cells when they ask you about it, it will be impossible for them to prove your working practices put you inside, since they can't force the client to talk to them about you. And US clients probably won't talk to them voluntarily.

Likely to be difficult for HMRC to prove control over ‘How’ the work is carried out too so pretty safe from IR35 point of view. Furthermore if client is overseas then the legislation applies for tax but not NICs. So unlikely HMRC would pursue. Incorporation would appear to be a no brainer on the face of it.