overseas contract and IR35

[Andy2]

Does any one know how are overseas contracts treated by HMRC from IR35 perspective.
If you say your overseas contract is outside iR35 , will HMRC challenge it ?

[BR14]

yes.

[jamesbrown]

The same as any other contracts (assuming the work is done in the UK and/or YourCo is based in the UK).

But, realistically, they don't win many of the cases they choose to fight, let alone cases involving overseas clients.

Post April-2020, the client will be responsible for the determination and the fee payer liable, assuming the draft legislation is enacted roughly as-is.

So IR35 is practically moot post April 2020 if you have overseas clients w/ no part of the supply chain in the UK, other than YourCo, although theoretically it still applies.

[Lance]

The same as any other contracts (assuming the work is done in the UK and/or YourCo is based in the UK).

But, realistically, they don't win many of the cases they choose to fight, let alone cases involving overseas clients.

Post April-2020, the client will be responsible for the determination and the fee payer liable, assuming the draft legislation is enacted roughly as-is.

So IR35 is practically moot post April 2020 if you have overseas clients w/ no part of the supply chain in the UK, other than YourCo, although theoretically it still applies.

if the client is overseas???? You sure about that?

[jamesbrown]

if the client is overseas???? You sure about that?

Sure, I've read the draft legislation. The client is responsible for the SDS, even if the client is overseas. Liability is with the closest point in the chain above the contractor based in the UK, which may be no one, otherwise the closest point overseas. Good luck pursuing overseas supply chains.

[Lance]

Sure, I've read the draft legislation. The client is responsible for the SDS, even if the client is overseas. Liability is with the closest point in the chain above the contractor based in the UK, which may be no one, otherwise the closest point overseas. Good luck pursuing overseas supply chains.

I think you’re interpreting it too literally. I’d the client is based outside the jurisdiction of UK law then it just doesn’t apply.
The contractor would be responsible for the determination assuming the work is some in the UK.

[jamesbrown]

I think you’re interpreting it too literally. I’d the client is based outside the jurisdiction of UK law then it just doesn’t apply.
The contractor would be responsible for the determination assuming the work is some in the UK.

I concede that we don't have the final legislation. However, I read the draft legislation as consistent with the intention reported in the consultation.

Where the agency or third party that would be the fee-payer is offshore, the liability moves to the next person above them in the contractual chain which is in the UK. If only the client is in the UK then they will be the liable party. Where a party in the contractual chain, including the client is outside the UK but the off-payroll worker performs services in the UK, fee-payers must still deduct tax and NICs.

[jamesbrown]

Some additional opinion in support of the above interpretation:

IR35 Reforms - when the end-client is based abroad - WTT Consulting

You may be able to find contrary opinion. Until we get the final legislation (and perhaps even afterwards), it is difficult to be certain, but I think my interpretation is the more likely one, even if yours is the more practical one (the one I predicted they would write into the consultation and draft legislation, but seemingly haven't)

[WordIsBond]

Some additional opinion in support of the above interpretation:

IR35 Reforms - when the end-client is based abroad - WTT Consulting

You may be able to find contrary opinion. Until we get the final legislation (and perhaps even afterwards), it is difficult to be certain, but I think my interpretation is the more likely one, even if yours is the more practical one (the one I predicted they would write into the consultation and draft legislation, but seemingly haven't)

What I don't get about that advice is that it has no legal force on a client with no presence in the UK. So it is completely unenforceable, so I don't actually see why I should bother foreign clients with it.

In any event, it is going to be changed very soon, if not immediately. I'd be shocked if it actually becomes legislation like this. It would potentially make a foreign client liable for ERNI, even though a foreign employer of a UK employee is not liable for ERNI. It's just one of those stupidities that idiots come up with when they are trying to figure out how to grab as much tax as possible, but without thinking through what it means in the actual real world. It won't survive.

[jamesbrown]

What I don't get about that advice is that it has no legal force on a client with no presence in the UK. So it is completely unenforceable, so I don't actually see why I should bother foreign clients with it.

In any event, it is going to be changed very soon, if not immediately. I'd be shocked if it actually becomes legislation like this. It would potentially make a foreign client liable for ERNI, even though a foreign employer of a UK employee is not liable for ERNI. It's just one of those stupidities that idiots come up with when they are trying to figure out how to grab as much tax as possible, but without thinking through what it means in the actual real world. It won't survive.

No, a foreign client won't be liable for ErNI without changes to other legislation; the geographic scope of that is set in the relevant NICs legislation. In that respect, it's no different to asking HMRC for a PAYE Direct payment scheme, DPNI (full PAYE) for a foreign employer with no UK presence, which is presumably what you're alluding to. Likewise, that liability wouldn't exist now (pre-April 2020) for YourCo.

Otherwise, I agree with you, which is why I was surprised by the consultation and draft legislation and that is presumably why Lance is surprised too. Still, I'm just reporting on what I'm seeing. Also, since when has logic interrupted HMRC from blowing themselves up?