Determining IR35 Status - EU clients

[Jings]

Hi all,

Looking at the government guidance notes (see link) it states that the test for determining IR35 status does not have to be done by an overseas company.

April 2020 changes to off-payroll working for clients - GOV.UK

I have contracts with 2 different EU companies; is it really just as simple as that I still continue to determine my IR35 status myself? In any case I don't think I'd get much joy out of asking my EU clients to perform IR35 tests just because the UK government says so!

[TheCyclingProgrammer]

I don’t think you’re reading that page correctly. Where does it say the rules do not apply to overseas businesses?

Nobody knows how exactly HMRC are going to force non U.K. business to do IR35 determinations but that that page certainly doesn’t seem to rule it out.

[Jings]

I don’t think you’re reading that page correctly. Where does it say the rules do not apply to overseas businesses?

Nobody knows how exactly HMRC are going to force non U.K. business to do IR35 determinations but that that page certainly doesn’t seem to rule it out.

"Who the rules apply to

A simplified test also applies to some clients and considers annual turnover.
You must apply the rules if you have an annual turnover of more than £10.2 million and are not:

• a company
• a limited liability partnership
• an unregistered company
• an overseas company"

I read that as meaning that the simplified test does not apply to overseas companies, therefore I retain my current position that I determine the IR35 status.

[WordIsBond]

Reads that way to me, too, though I don't think it was in the draft legislation that way. No time to look right now.

I've assumed all along that the determination would continue to be my responsibility and MyCo's liability, for foreign clients. A lot has been written about it falling on foreign clients and I think the draft legislation pretty clearly said as much, but I've assumed that is unenforceable and that it would probably end up reverting to me / MyCo, if not initially, within a year or two.

But OP, if you have a UK agent it will be on them to make the determination, even if the client is overseas. The only way you'll make the determination is if the entire chain is overseas. In that case, there is either an unenforceable liability on the client, in which case you can forget about IR35, or it will devolve back to you. But if client or agency is in the UK, they'll have to make the determination.

[Jings]

I don't have an agent, my contracts are direct with the clients.

[jamesbrown]

No, I think you're reading it incorrectly.

This is within the context of what distinguishes a small company from a medium or large one, not in general.

The draft legislation doesn't indicate anywhere that the small companies rules always apply when considering a fully overseas supply chain. Quite the reverse, it includes a concept of deemed residence.

[TheCyclingProgrammer]

"Who the rules apply to

A simplified test also applies to some clients and considers annual turnover.
You must apply the rules if you have an annual turnover of more than £10.2 million and are not:

• a company
• a limited liability partnership
• an unregistered company
• an overseas company"

I read that as meaning that the simplified test does not apply to overseas companies, therefore I retain my current position that I determine the IR35 status.

Just because the simplified test doesn’t apply, why wouldn’t the main test outlined above apply to overseas companies?

My reading is that if you meet the above criteria you apply the simplified test otherwise you apply the main test.

[jamesbrown]

Just because the simplified test doesn’t apply, why wouldn’t the main test outlined above apply to overseas companies?

My reading is that if you meet the above criteria you apply the simplified test otherwise you apply the main test.

I concur with your reading, FWIW (also based on my reading of the legislation).

[Jings]

But none of the main criteria apply to non-UK companies!!!!!!

[jamesbrown]

But none of the main criteria apply to non-UK companies!!!!!!

Where does it say that? (!!!!!!)

Just read the draft legislation. Forget about HMRC guidance and hot takes, which are replete with errors and misinformation.