Need advice on IR35

[humucagir]

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[jamesbrown]

Can you please explain? So, my client is happy if I switch to sole trader (individual) from LTD.
Now in terms of liability: US yes, dangerous, but they don't have jurisdiction here do they? What worst can happen (big IF) ?

The jurisdiction and governing law is in the contract. If you think you can get away with breaching the contract and not being pursued under the jurisdiction and governing law it asserts, good luck with that.

Sorry, that's the bit I don't understand. Don't I have to pay ErNI (13%) or so through DPNI? Since I have to run the payroll, thus deduct ErNI? Otherwise that would be totally legal and way more tax efficient than LTD Inside IR35 no?

The DPNI scheme includes EeNI and PAYE only, by definition. There is no ErNI for an overseas "employer" that does not have a UK presence. Sure, the tax is lower than inside IR35, but not lower that operating as a sole trader, which also doesn't carry ErNI and has a reduced rate of NI.

[humucagir]

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[jamesbrown]

Well, I've never been to US and I don't think I'll ever go. So what can they do?

There are mechanisms to recover debt across borders and, should they succeed, the additional fees will be enormous, I expect.

And there's no employment status consideration? i.e. that'll be perfectly legal with all the due tax paid to HMRC?
Because I thought I have to pay ErNI as well.
What about just sole trader? i.e. doing my own SA. If rate of NI is reduced. Is that 100% ok with HMRC?

Again, employment status and DPNI are orthogonal. But there is no risk of IR35 or a false self-employment claim, no.

Again, there is no Employer NI if your nominal employer has no UK presence and that is well established, so zero risk there.

If you're a sole trader, there is a risk that you would be considered falsely self-employed by HMRC, but the liability would not rest with you in the first instance (although you would need professional advice on that regarding an overseas client).

[humucagir]

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[eek]

Unless I'm doing something like stealing company secrets or anything on that scale, which I'm not planning to, I don't really think there is that much risk.



So compared to Inside IR35, it's basically 15% more tax efficient. Then why do people go Inside IR35 rather than just doing DPNI scheme and paying less tax?

Hmm, I read up on this. Apparently for DPNI I need a proper employment contract, not the consultant one I have. And they won't give me a proper employment contract. What are the risk of sole trading?

Lack of knowledge, hassle and perceived risk would be my guess

[humucagir]

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[northernladuk]

I just got off a call with an accountant. They said, that even if the contract is Inside IR35, there's no ErNI to pay if you run a payroll. They said you can just run a payroll from LTD an pay yourself all the salary, but you won't have to do a ErNI deduction because the client is overseeas and it's not through an umbrella.
Do you guys know anything about it? My understanding is that whatever you do, if you're LTD and operate payroll you pay ErNI and doesn't matter the source of income

Very few clients/agents will allow payment to LTD company so it's a very unlikely scenario. There is a risk if you don't pay your tax they will be on the hook, plus they can't skim of it.

Google it though. Plenty of chat about this on these forums and out in the bigger world

[jamesbrown]

Unless I'm doing something like stealing company secrets or anything on that scale, which I'm not planning to, I don't really think there is that much risk.



So compared to Inside IR35, it's basically 15% more tax efficient. Then why do people go Inside IR35 rather than just doing DPNI scheme and paying less tax?

Hmm, I read up on this. Apparently for DPNI I need a proper employment contract, not the consultant one I have. And they won't give me a proper employment contract. What are the risk of sole trading?

DPNI is a very low % situation. It only applies when you have an overseas employer that has no UK presence and elects not to create a UK-based payroll via a payroll company. I expect that a tiny, tiny fraction of UK workers are on DPNI schemes. It is basically intended for embassy staff and international organisations without a UK presence.

Regarding, a "proper employment contract", I have no idea where you read that, but I think that is incorrect since there is no relationship between PAYE and employment status. You get a DPNI scheme by calling HMRC and asking them to stand one up. The hard part is getting through to someone who has the remotest clue about what a DPNI scheme is, who will then try to persuade you that you should file a SATR instead. At one time, you could call the relevant team directly, but I don't think so anymore.

[humucagir]

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