Overseas, 10M+, and Outside?

[Keanu2020]

Hello, a quick question.

What happens if you contract with an overseas company (contract for services names the Canada HQ office as contracting entity), but they have a satellite UK registered office (not mentioned at all in contract).

Parent in Canada is over £10M, but UK entity has no revenue yet (work is to help build out UK operation).

I’m not clear how the rules work – I’m assuming as UK office under £10M net, £5M balance, you get to decide. However, with parent doing much more is there some strange quirk where they count that value in tandem with there being UK entity?

Thanks.

[eek]

Hello, a quick question.

What happens if you contract with an overseas company (contract for services names the Canada HQ office as contracting entity), but they have a satellite UK registered office (not mentioned at all in contract).

Parent in Canada is over £10M, but UK entity has no revenue yet (work is to help build out UK operation).

I’m not clear how the rules work – I’m assuming as UK office under £10M net, £5M balance, you get to decide. However, with parent doing much more is there some strange quirk where they count that value in tandem with there being UK entity?

Thanks.

It's the overall company size that matters - so yep you need a determination from the Canadian end client.

[Keanu2020]

God that is messy

eek - assume that is the case becuase of UK entity

[wattaj]

God that is messy

eek - assume that is the case becuase of UK entity

Yes.

Ref.: https://uk.markel.com/about-us/news-...nt-is-overseas

[Lance]

on the plus side. If you invoice them and they pay then you're good as gold. Chances are they won't know or care about IR35.
Don't hold your breath for an SDS though. If you insist on one they'll likely drop you.

What does the agency say?

[Keanu2020]

There is no agency, its direct

[jamesbrown]

Yes, under Chapter 10 as others have noted. I think the issue will be with the UK entity, which is now liable for any incorrect outside decision in the first instance, even if they are a small company under the CA 2006. In other words, the more the UK entity knows about this, the more likely you are to see friction and perhaps even the risk of a change in status when they panic.

[Keanu2020]

Just when you think you have found a nice little overseas direct contract as well.

Pretty clear from wording of the contract they don’t have a clue on any of this.

Might sound a strange question, but I assume HMRC still only have 4 yrs to raise an issue? I ask as rate is well above normal, tempted to take and just stick half in rainy day fund for 4 years.

[jamesbrown]

Just when you think you have found a nice little overseas direct contract as well.

Pretty clear from wording of the contract they don’t have a clue on any of this.

Might sound a strange question, but I assume HMRC still only have 4 yrs to raise an issue? I ask as rate is well above normal, tempted to take and just stick half in rainy day fund for 4 years.

It's a tough call. I personally don't take Chapter 10 contracts for this reason, but I'm probably not very representative. You could try to mitigate the risk by ensuring good payments terms (e.g., weekly) and being absolutely vigilant about any clauses that purport to transfer liability (US clients love these).

I wouldn't overthink HMRC timelines but, since you asked, the normal limits are 1 year to open an enquiry, then 4 years for any assessment, extended to 6 for carelessness and 20 for dishonesty (the last two are not relevant in this scenario). However, the UK PE is on the hook initially and it might be very hard for them to transfer liability back to you via the US client, especially if your contract doesn't contain clawbacks.

Realistically, in this scenario, unless the US client engages their UK office upfront w/r to compliance (and even then, the UK PE is probably clueless as a startup), the whole supply chain will be totally clueless about this until it's far too late for all concerned. In short, if I were to take a risk on a Chapter 10 contract, I would feel more comfortable in your scenario than most, subject to the contractual terms with the US client.

[Keanu2020]

Thanks James. Its kind of my thinking, so far stayed away, but this does seem very low risk. You are 100% right about clawback, its a classic north american contract rammed full of legal libaility transfers for everything (tax is just one of a long list).