Reply to: Determining IR35 Status - EU clients

[WordIsBond]

It's difficult isn't it, as you don't want to spook them! Two other things I've been wondering:

• If the overseas client isn't aware of the Legislation is the worker required to inform them?
• If the overseas client then fails to make any determination, because they see no advantage to doing so given they're essentially out of liability anyway, is there any potential fallback to the worker?

There isn't any legislation yet to enable an accurate answer to this question.

Based on the draft legislation, if there's an obligation on the worker to inform the overseas client, I've missed it.

Based on the draft legislation, there is no obvious fallback to the worker, but I wouldn't trust to that.

Elsewhere, I wrote this:

They can argue that if there is no enforceable liability on the client because the client is outside the UK jurisdiction that the situation devolves to what it is for UK employees of foreign companies. UK employees of foreign companies are personally liable to pay their income tax and their employee NI. Foreign companies don't have to withhold tax and make payments to the UK even if they have a UK employee.

I don't think the legislation as written permits this but I can see them arguing it and you'd have to defend it. Keep good evidence that you are outside of IR35 even with a completely foreign chain.

I don't think they'd have a strong case if they argued that, but I am not a lawyer, and I wouldn't want to have to defend it. I'd rather keep ironclad evidence that I'm outside, rendering the point moot. If you have an overseas client, and no UK agency, it really shouldn't be heard to amass enough evidence that you aren't under enough SDC to be inside. You should have a contract review and should be able to get sufficiently good contract terms to keep you outside.

That's better than ending up arguing over whether poorly drafted legislation means there's no liability for you.

[Pring]

I think I am affected with all of that as well... No idea how to ask a client about the SDS for the IR35 purposes.

It's difficult isn't it, as you don't want to spook them! Two other things I've been wondering:

• If the overseas client isn't aware of the Legislation is the worker required to inform them?
• If the overseas client then fails to make any determination, because they see no advantage to doing so given they're essentially out of liability anyway, is there any potential fallback to the worker?

[a l e x]

Do you know enough about Ir35 to challenge it?

In the court? Definitely not.

[northernladuk]

I think I am affected with all of that as well... No idea how to ask a client about the SDS for the IR35 purposes.

Do you know enough about Ir35 to challenge it? If not then it doesn't matter asking about it.

[a l e x]

I think I am affected with all of that as well... No idea how to ask a client about the SDS for the IR35 purposes.

[jamesbrown]

Good explanation, thanks. I understand that overseas end client is on the hook for the determination but for agency/end-client as fee payer I’m not sure how to square that with the statement at Fee-payer responsibilities under the off-payroll working rules - GOV.UK about fee payers having to be UK Resident or have a place of business in the UK. Unless that’s been superseded.

Agree that it's seemingly contradictory. However, 10(2)61R(7) introduces the concept of "deemed residency", so I assume the guidance is just phrased loosely. Afterall, you can't simultaneously say that overseas clients and fee payers are deemed resident and that say they have nothing to do, so I'm going with the draft legislation as being the thing to read and the guidance as semi-useful fluff.

[BR14]

They're going to need a bigger boat.

yeh, ford class.

[Pring]

Agree. Ultimately, the draft legislation and this new guidance suggest that an overseas supply chain is treated no differently than a domestic supply chain for the purposes of IR35, so the Overseas Agency would be the Fee Payer in your first example, the Overseas End Client in your second, and the Overseas End Client always provides the SDS and, until they do (and with reasonable care), they remain the Fee Payer too. So, absence a clue (which we can assume), the Overseas End Client will be on the hook.

Good explanation, thanks. I understand that overseas end client is on the hook for the determination but for agency/end-client as fee payer I’m not sure how to square that with the statement at Fee-payer responsibilities under the off-payroll working rules - GOV.UK about fee payers having to be UK Resident or have a place of business in the UK. Unless that’s been superseded.

[jamesbrown]

Well, HMRC will be asserting that they are on the hook, anyway. Somehow I suspect when they try to reel in that line they'll find that it isn't strong enough to land the Overseas End Client anywhere that they have any jurisdiction....

They're going to need a bigger boat.

[WordIsBond]

the Overseas End Client will be on the hook.

Well, HMRC will be asserting that they are on the hook, anyway. Somehow I suspect when they try to reel in that line they'll find that it isn't strong enough to land the Overseas End Client anywhere that they have any jurisdiction....

[jamesbrown]

Thanks, those are interesting. I won't hold my breath but it'd be nice if they could flesh out the Examples the two scenarios I tend to work with:

Worker’s intermediary -> Overseas Agency -> Overseas End Client
Worker’s intermediary -> Overseas End Client

It'd also be interesting to know what they expect the PSC to do when the Overseas Agency/End Client neglects to provide a determination, since seemingly there's no real advantage for them to do so.

Agree. Ultimately, the draft legislation and this new guidance suggest that an overseas supply chain is treated no differently than a domestic supply chain for the purposes of IR35, so the Overseas Agency would be the Fee Payer in your first example, the Overseas End Client in your second, and the Overseas End Client always provides the SDS and, until they do (and with reasonable care), they remain the Fee Payer too. So, absence a clue (which we can assume), the Overseas End Client will be on the hook.

[Pring]

This is all draft guidance that has been yanked (and it contains a number of errors) but, from Google's web cache:

https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm10025]ESM10025 - Employment Status Manual - HMRC internal manual - GOV.UK[/url]

and:

https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm10026]ESM10026 - Employment Status Manual - HMRC internal manual - GOV.UK[/url]

Thanks, those are interesting. I won't hold my breath but it'd be nice if they could flesh out the Examples the two scenarios I tend to work with:

Worker’s intermediary -> Overseas Agency -> Overseas End Client
Worker’s intermediary -> Overseas End Client

It'd also be interesting to know what they expect the PSC to do when the Overseas Agency/End Client neglects to provide a determination, since seemingly there's no real advantage for them to do so.

[jamesbrown]

I'm really struggling for clarity here too. I run a UK based PSC that contracts for a US based company. I've seen a lot saying that the US based company is still liable for making the determination but many places where it is stated that they aren't. In addition to the ones noted on the thread I noticed this definition of "Fee Payer" today in Fee-payer responsibilities under the off-payroll working rules - GOV.UK



If no-one in the labour supply chain, except for me/my PSC, is resident in the UK then that looks like no-one is classed as the Fee Payer under the off payroll working rules? So the determination stays with me, as it does currently?

This is all draft guidance that has been yanked (and it contains a number of errors) but, from Google's web cache:

ESM10025 - Employment Status Manual - HMRC internal manual - GOV.UK

and:

ESM10026 - Employment Status Manual - HMRC internal manual - GOV.UK

[Pring]

I'm really struggling for clarity here too. I run a UK based PSC that contracts for a US based company. I've seen a lot saying that the US based company is still liable for making the determination but many places where it is stated that they aren't. In addition to the ones noted on the thread I noticed this definition of "Fee Payer" today in Fee-payer responsibilities under the off-payroll working rules - GOV.UK

As a fee-payer, you must:

• be resident in the UK, or have a place of business in the UK

If no-one in the labour supply chain, except for me/my PSC, is resident in the UK then that looks like no-one is classed as the Fee Payer under the off payroll working rules? So the determination stays with me, as it does currently?

[jamesbrown]

Many thanks James.

Ok, I Had actually found that doc and performed a search on it for overseas companies. Nothing. Words searched include International, Overseas, Foreign.

Right, exactly. Little or no distinction.

However, for an example of a distinction, take a look at 10(2)61(R)(7) in the existing legislation for the public sector (FOI), which is not amended by the draft. Here's a link, as originally passed:

Finance Act 2017