Current application of IR35 when contracting outside UK

[Noiro]

Hi all,

Please forgive my lack of search skills here!

Can anyone point me to current guidance on IR35 when you are UK based and contracted to a non-UK client?

The contract with my company is with an agency in the EU. They have no UK presence at all.

The end client is a multi-national and they do have a UK company - though my statement of work is for services to the head office (non EU but in the EEA).

How would this likely work if HMRC decide to investigate?

[jamesbrown]

If the end client has a UK office or permanent establishment and you are UK resident and conducting the work from within the UK, then Chapter 10 of IR35 applies and the end client is ultimately liable. Whether it understands this is another matter - it probably has no knowledge of your dealings with its overseas branch. Nevertheless, the situation remains that the UK end client is liable. The first company in the supply chain that is UK resident would be responsible for operating payroll if the contract is determined to be inside IR35 at a later date. The client company is also responsible for issuing an SDS, although this would come from the overseas company. Honestly, you can probably expect none of this to be understood or enacted.

As to YourCo's liability in the event that a mistake is made, that is hard to say and it would partly depend on the contractual terms and any liability clauses therein and whether they work, but it is a risk. Personally, I don't accept clients with a UK office or PE anymore, but your risk tolerance may be different.

[Noiro]

The first company in the supply chain that is UK resident would be responsible for operating payroll if the contract is determined to be inside IR35 at a later date.

Thanks - this makes sense and is the detail I was missing to understand how this would work in practice.

Honestly, you can probably expect none of this to be understood or enacted.

Absolutely the case here! That's why I was more curious about the mechanics - the agency and contracted end client (the EEA based entity) would likely ignore any approach from HMRC as not being their concern.