US client - No UK presence

[Blencathra]

I have been offered a contract with a US-based company with no UK presence. I intend to work from the UK through my PSC and will contract directly with the client (no agency). The client is currently drawing up a contract.

I understand that the Feb 2020 government review of IR35 clarified that in this situation, the PSC is responsible for determining IR35 status. Clearly, I would like to perform the role in a manner consistent with outside IR35.

AFAIK the client has never contracted with a UK-based PSC and therefore I assume knows nothing about IR35.

Does anyone have any practical advice on:

- how to educate the client on IR35
- ensure all the necessary 'outside' clauses are included in the contract
- how best to obtain evidence of 'outside' working practices

I'm a bit concerned that starting to talk about substitution may scare them off but understand that they need to accept this for the role to be truly 'outside'.

Thanks in advance.

[cojak]

Have a read of this - it applies to your situation.

https://www.contractoruk.com/forums/...nisations.html

[jamesbrown]

You should treat the US client as you currently would any of your UK clients, prior to April.

Get a contract review, amend the contract as needed, ensure your working practices comply.

Notwithstanding the flaws in CEST, you could also ask them to complete a CEST. I have done this for all my US clients of any significance (generally not for fixed price work or very short-term projects) and I haven't had a problem with it. Depending on the US state in which the client is based, there are similar laws surrounding false self-employment, so they will want to avoid that risk too.

You'll need PI insurance for North America - your existing PI insurance will almost certainly have a geographic exclusion.

If there is no reasonable prospect of substitution, focus on the other aspects - it is pointless trying to massage a contract away from the reality.

Oh, one final caveat is that the legislative underpinning remains in draft, so keep an eye on that (but the guidance does point to the small company/BAU regime applying).

[WordIsBond]

If there is no reasonable prospect of substitution, focus on the other aspects - it is pointless trying to massage a contract away from the reality.

Agree with everything JB said (PI insurance, etc). It would help if you could provide the contract under UK law, that would both save on PI AND be an outside pointer -- US companies don't sign UK contracts with their employees, they do with UK business suppliers.

Re: the quote above, focus especially on supervision / direction / control. Contract should state that you determine when, where, and how you do the work (especially how). If the contract states that, it's going to be very hard for HMRC to fight it since they can't compel the client to talk to them and say things that undermine it.

Tell the client it is necessary to include language like that to protect both of you. You are protecting them from HMRC deciding you are an arm of their company and that therefore they have a presence over here. The likelihood of that is almost nil but one never knows what HMRC will do if they decide you are actually an employee (it's only a step from there to "key" employee, after all) and it works wonders with US companies who don't have a presence here.

You'll also want to tell them that if HMRC ever comes calling they should just say that their relationship with YourCo Ltd is/was governed by their contract with YourCo Ltd, and refer them to the contract. They should not answer any questions other than that.

[WordIsBond]

Oh, I also use CEST for non-UK clients, always. I don't bother to ask the clients to do it, though. I do it myself based on the terms of the contract. If the contract states something, I work according to that, and I use CEST according to it as well. CEST answered according to the contract is IMO as good as a contract review, for a foreign client.

Foreign clients are not likely to agree a contract contrary to what they expect for working practices. It's not like a role through an agency where the client's expectations are in the agency contract that you never see. There, working practices trump the contract, but with a foreign client, in my experience, the contract will always match the client's expectation of working practices.

So CEST answered according to the contract which gives an outside determination is pretty strong evidence. I take it a step further -- it would be almost impossible for me to find a sub for most of my roles, because I'm so niche. So even though my contracts state the right to substitute, I'm alert to the fact that HMRC could ask if it is a sham since I don't have someone who could do it.

So I keep two CEST printouts for every contract. One shows me outside with the right of substitution. The other shows me outside even with no right of substitution, by virtue of no SDC.

[mcc1380]

US Client - No UK presence

Hi all,
This is my first post and while searching this forum, I found this thread, which seems pretty close to my situation. I also have been offered a contract position for a US-based startup company. Major difference is,

1) I don't have a PLC/PSC. I will work as a self-employed person.
2) I have tried my best to make the client aware of the HMRC rules that are on CEST. The contract I received from them, I would say, is not in line. Can someone recommend a tax solicitor, service or someone who can review contracts and make necessary adjustments?

Thanks

[jamesbrown]

Hi all,
This is my first post and while searching this forum, I found this thread, which seems pretty close to my situation. I also have been offered a contract position for a US-based startup company. Major difference is,

1) I don't have a PLC/PSC. I will work as a self-employed person.
2) I have tried my best to make the client aware of the HMRC rules that are on CEST. The contract I received from them, I would say, is not in line. Can someone recommend a tax solicitor, service or someone who can review contracts and make necessary adjustments?

Thanks

If you're self-employed, that's entirely different. While employment status is an issue for sole traders, it's primarily for the client or agent; there's no tax liability on you, personally. There's no intermediary, so the intermediaries legislation (IR35) doesn't apply.

The main issue for you will be the unlimited liability w/r to your personal assets if something goes wrong, contractually. Personally, I wouldn't work with any US clients unless I had the protection of a Ltd. company because the US is a litigious system.

[mcc1380]

If you're self-employed, that's entirely different. While employment status is an issue for sole traders, it's primarily for the client or agent; there's no tax liability on you, personally. There's no intermediary, so the intermediaries legislation (IR35) doesn't apply.

The main issue for you will be the unlimited liability w/r to your personal assets if something goes wrong, contractually. Personally, I wouldn't work with any US clients unless I had the protection of a Ltd. company because the US is a litigious system.

Thanks for your quick response. It would be fair to say, I have no clue what I am getting my self into. Can you recommend a service/company who can guide me through this?

[jamesbrown]

Thanks for your quick response. It would be fair to say, I have no clue what I am getting my self into. Can you recommend a service/company who can guide me through this?

It depends whether you’re fixed on the sole trader route. If you aren’t, it’s more complex because you have more options. If you’re a sole trader, it’s really quite simple and essentially no different than working with a UK client, save the possibly greater risk from a lack of limited liability. I wouldn’t accept that risk, but it’s personal choice.

[jamesbrown]

If your options remain open, you could try Sue @ IPaye. I think she is more focused on Europe but would still have a good general idea.