Reply to: Overseas and IR35

[jamesbrown]

There needs to be a liability to tax you personally. If you're not UK resident and the work is done outside the UK, there is no liability to tax. IR35 does not change the rules surrounding UK tax residency (the draft legislation proposed to introduce a deemed UK residency provision for overseas clients, but it looks like that will disappear).

You are responsible for determining your own IR35 status and that will also now apply from April 2021 if the supply chain is fully overseas. However, if there is a UK client, they may choose not to play ball and may assume (and assert) that you're inside IR35 even without a liability to tax. Until then (and even after then), there shouldn't be a liability.

[Lance]

I would imagine that your end client would determine you as inside. If not no other reason than your personal tax residency isn't their problem, only that they pay a UK LTD.

IR35 is a legislation against the company, so I'd say that HMRC would find you inside as well and charge you accordingly. How that would stack up against you personally is something you'd probably need a lawyer for.

[somsok]

The end client is in UK. I'm treated more like an internal resource rather than external company providing services. I'm sure that I would find myself inside IR35 if I lived in UK - no doubt about it. But I wonder if IR35 applies to me if I work 100% remotely and live outside of UK.

[GhostofTarbera]

Hi guys, what's your take on 6 and 7?

I live in EU where I pay personal tax from paying dividends. But my PSC is in UK where I pay corporate tax and national insurance. Does IR35 apply at all? Thanks!

Depends on your working practices


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[somsok]

Hi guys, what's your take on 6 and 7?

6) UK-based: Client, PSC --- EU-based: Contractor --- IR35 applies: ? (potentially?)
7) UK-based: PSC --- EU-based: Contractor, Client --- IR35 applies: ? (probably strange scenario)

I live in EU where I pay personal tax from paying dividends. But my PSC is in UK where I pay corporate tax and national insurance. Does IR35 apply at all? Thanks!

[lecyclist]

deepblueuk,
I'm in a similar position in the EU, with many years of non-residence, working for a UK client through my own UK limited company, with occasional site visits to the UK.

Assuming you have checked the HMRC statutory residence test [ RDR3: Statutory Residence Test (SRT) notes - GOV.UK ], typically the most pertinent area will be section 4, related to number of ties, this will give you an idea of how many days you can be in the UK and remain non-resident. The number of days you mentioned you will be in the UK is nothing to worry about (and could probably be much greater if required.. see link), and you are clearly outside IR35.

lecyclist

[jamesbrown]

Is this the official guidance now?

Off-payroll rule exclusion for UK contractors' wholly overseas clients 'could be a loophole'

No, that seems to be a bunch of commentators punting on the review.

But, yes, the updated information from HMRC is that the existing rules (or small business provisions) will apply to fully overseas supply chains. Will need to wait for the amended Finance Bill to say anything more than that.

[Winger300]

Is this the official guidance now?

Off-payroll rule exclusion for UK contractors' wholly overseas clients 'could be a loophole'

[Lance]

I had read your paragraphs several times over. Thank you.

In other words, it's not magic! I got it.

1) Assessment == reality
2) Assessment != reality

SOW does not guarantee the assessment or whether it should be taken out.

Say a 6 month contract from Europe comes into the inbox for the equivalant £600 per day + VAT. You are UK LTD contractor resident in the UK. You perform the duties remotely. You get access to their Github source code and deliver the development, or build a website in React and Angular deliver to the client over Dropbox or deploy it to Amazon Web Service (cloud). Anyway details, details... In order to protect yourself, could your PSC volunteer to pay Employer NI to the authorities ahead of time? The LTD PSC has one employee (contractor) therefore the NI comes from the basic annual salary say £12,000. LTD still pays Corporate Tax as in the pre-2020 legislation era. By volunteering yourself for a sort of Off Payroll working is that a [future] strategy, might be delay any investigation. I am thinking the authorities would go after low-hanging fruit first of all and spend much of their human time and energy chasing those folk...

maybe..
That's lots of money, to possibly reduce the risk of an investigation, whilst not actually addressing the risk/impact of being found wanting in said investigation.

[rocktronAMP]

I think you’re mixing up a few things.

First, being required to assess IR35 does not mean being caught.

Second, things like B2B and SoW are about the details of the working arrangements and are orthogonal to whether an assessment should be carried out.

Anyway, to simplify, it’s like this. If the supply chain is fully overseas, it’s BAU - the PSC is responsible for the assessment and liable for getting it wrong. The assessment could be inside or outside. The reality could be inside or outside. The assessment could be wrong. If it’s wrong, the PSC is liable. If there is a UK entity in the supply chain, that entity is the Fee Payer. The Fee Payer is responsible and liable for operating PAYE correctly. The assessment could be inside or outside. The reality could be inside or outside. The assessment could be wrong. If it’s wrong, the Fee Payer is liable.

I had read your paragraphs several times over. Thank you.

In other words, it's not magic! I got it.

1) Assessment == reality
2) Assessment != reality

SOW does not guarantee the assessment or whether it should be taken out.

Say a 6 month contract from Europe comes into the inbox for the equivalant £600 per day + VAT. You are UK LTD contractor resident in the UK. You perform the duties remotely. You get access to their Github source code and deliver the development, or build a website in React and Angular deliver to the client over Dropbox or deploy it to Amazon Web Service (cloud). Anyway details, details... In order to protect yourself, could your PSC volunteer to pay Employer NI to the authorities ahead of time? The LTD PSC has one employee (contractor) therefore the NI comes from the basic annual salary say £12,000. LTD still pays Corporate Tax as in the pre-2020 legislation era. By volunteering yourself for a sort of Off Payroll working is that a [future] strategy, might be delay any investigation. I am thinking the authorities would go after low-hanging fruit first of all and spend much of their human time and energy chasing those folk...

[jamesbrown]

Are you saying that if a EU company has its' (only) worker/director as UK resident and work is done in the UK (for non UK client) that said EU company must pay corporation tax in the UK?
I am not sure how will this work in practice in conjunction with company's home tax authorities.

Anyway the question was about if IR35 applies to this set up.

Yup.

But, tax treaties.

I already answered your first question. It does.

[abz2020]

If I go and work in Holland I'm subject to Dutch rules which mean I can't use my limited company and need to pay tax in Holland.
If I go and work in Denmark - I'm subject to Danish rules which means I need to pay tax in Denmark.

The same is true for the UK, if you (live and) work in the UK you need to pay tax in the UK.

I avoided moving to Northern Ireland years ago because that would have meant dealing with Eire tax rules if I had to take work in Dublin.

Yes, but do you mean personal tax rules or corporate tax rules?
I agree for personal tax rules.

[eek]

Are you saying that if a EU company has its' (only) worker/director as UK resident and work is done in the UK (for non UK client) that said EU company must pay corporation tax in the UK?
I am not sure how will this work in practice in conjunction with company's home tax authorities.

Anyway the question was about if IR35 applies to this set up.

If I go and work in Holland I'm subject to Dutch rules which mean I can't use my limited company and need to pay tax in Holland.
If I go and work in Denmark - I'm subject to Danish rules which means I need to pay tax in Denmark.

The same is true for the UK, if you (live and) work in the UK you need to pay tax in the UK.

I avoided moving to Northern Ireland years ago because that would have meant dealing with Eire tax rules if I had to take work in Dublin.

[abz2020]

While it’s a company tax, it’s applied according to the residency status of the worker, because that determines whether there is a charge to tax. More importantly, in that situation, the PSC is probably UK resident because it is centrally controlled and managed in the UK.

Are you saying that if a EU company has its' (only) worker/director as UK resident and work is done in the UK (for non UK client) that said EU company must pay corporation tax in the UK?
I am not sure how will this work in practice in conjunction with company's home tax authorities.

Anyway the question was about if IR35 applies to this set up.

[jamesbrown]

How is IR35 applicable to number 4?
If the contractor is UK resident, but both end client and contractor's LTD are EU based (even in 2 different EU states).
Surely only UK personal income tax should apply to the contractor for income of EU LTD.
No?

While it’s a company tax, it’s applied according to the residency status of the worker, because that determines whether there is a charge to tax. More importantly, in that situation, the PSC is probably UK resident because it is centrally controlled and managed in the UK.