IR35 status - UK presence of a Netherlands company (indirectly through acquisition)

[UKfrelancer]

I have a contract agreed directly with a client in the Netherland working through my UK limited company. Now I'm seeking advice on IR35. There was an acquisition of this NL company in 2019 and the company that made the acquisition does have a presence in the UK. Therefore, does this make the client responsible for the IR35 declaration. Or can these two companies be treated as separate entities in the eyes of HMRC?

The NL company to which the contract is agreed with has come back to say it doesn't have any UK presence so it cannot seek an SDS. The UK presence is of the company that acquired them back in 2019, but they have no real dealings with this company.

Do I just need to play it safe and go inside IR35?

[jamesbrown]

If the client has a UK connection immediately before the start of the tax year in question, such as a permanent establishment, then the overseas client is responsible for the SDS and any debt resulting from the failure to operate a UK payroll correctly will be collected from the UK connection.

If the client has no UK connection, then YourCo is responsible and liable.

This is a basic factual question to be resolved by the supply chain above you (does the client have a UK connection, such as a UK permanent establishment?), even if they are clueless. That said, you seem to have answered the question yourself, they do.

Regarding your last question, that is a completely separate question. Whether the contract is inside or outside IR35 is a separate factual question, based on the working practices. But, sure, you can always choose to work via an umbrella (the only sane way to do it if you want to work "inside IR35" - note that IR35 strictly does not apply at all to an employee-type arrangement and you would be an employee of the umbrella, but that is largely semantics).

[UKfrelancer]

If the client has a UK connection immediately before the start of the tax year in question, such as a permanent establishment, then the overseas client is responsible for the SDS and any debt resulting from the failure to operate a UK payroll correctly will be collected from the UK connection.

If the client has no UK connection, then YourCo is responsible and liable.

This is a basic factual question to be resolved by the supply chain above you (does the client have a UK connection, such as a UK permanent establishment?), even if they are clueless. That said, you seem to have answered the question yourself, they do.

Regarding your last question, that is a completely separate question. Whether the contract is inside or outside IR35 is a separate factual question, based on the working practices. But, sure, you can always choose to work via an umbrella (the only sane way to do it if you want to work "inside IR35" - note that IR35 strictly does not apply at all to an employee-type arrangement and you would be an employee of the umbrella, but that is largely semantics).

Thank you for your reply.

The Netherlands company to which the contract is agreed is a subsidiary of a larger company, and that larger company has UK offices. I sought some advice from Qdos and they confirmed the same and confirmed that the client is responsible for the IR35 determination and compliance.

So my final question is this. The initial proposed contract is with my limited company and therefore you could say the client 'assumed' outside IR35 (i.e. a Business to business contract). I'm well aware the end client 'should' provide an SDS to back this up (even if they are clueless, like you said). So, is it illegal to sign the contract and start any work before receiving the SDS from the client? I know that on the basis of UK presence the responsibility is with the client, but from a limited company do I have a responsibility to ensure the client gives me a valid SDS before signing the contract?

Hope all that makes sense.

[jamesbrown]

Thank you for your reply.

The Netherlands company to which the contract is agreed is a subsidiary of a larger company, and that larger company has UK offices. I sought some advice from Qdos and they confirmed the same and confirmed that the client is responsible for the IR35 determination and compliance.

So my final question is this. The initial proposed contract is with my limited company and therefore you could say the client 'assumed' outside IR35 (i.e. a Business to business contract). I'm well aware the end client 'should' provide an SDS to back this up (even if they are clueless, like you said). So, is it illegal to sign the contract and start any work before receiving the SDS from the client? I know that on the basis of UK presence the responsibility is with the client, but from a limited company do I have a responsibility to ensure the client gives me a valid SDS before signing the contract?

Hope all that makes sense.

Have a read of this: https://forums.contractoruk.com/acco...contracts.html

Basically, I wouldn't assume anything.

They don't actually need to provide you with an SDS, by law, until the client makes their first payment. However, you use the word "directly" in your OP, so I assume (and have assumed) no further intermediaries, in which case it will be when they pay YourCo. However, realistically, they are probably clueless. Bottom line, I would be very wary indeed about accepting any contract without an SDS, else you should prepare yourself for one later that says your contract is "inside" afterall.

You don't have any particular responsibilities w/r to the SDS process, other than not acting fraudulently to hide things (but you're not going to do that). It's on your client but, again, you cannot realistically expect the client to have any clue in this situation. All you can do is force the issue by not signing, at which point they may get legal/compliance involved to check our what you're saying rather than merely procurement (assuming this is a large company), at which point they will probably withdraw the offer. If I were them, I would - it's hopelessly unrealistic to expect overseas clients to deal with this situation. You may be lucky and convince them, but I wouldn't expect it.