IR35 applicable for overseas clients?

[NotAllThere]

Discussion re: avoidance/evasion moved to here: http://forums.contractoruk.com/gener...avoidance.html

[malvolio]

Hi, Malvolio. There are several factors, as I mentioned, including factors related to my working conditions. That being said, it was my understanding that past employment in the same role was part of the picture, so that's news to me. I'll have the contract and working conditions reviewed by B&C (or similar) out of curiosity. Thanks.

Worth doing, obviously, but the basic rules remain; any one of D&C, MOO or RoS is sufficient to put you outside ITR35, providing they are genuine. The more the better, natch. Theswe days, we really should start from the position that we are outside and see if we might be inside. And take a look at the latest edition of PCG's Guide to Freelancing; the world has moved on.

[malvolio]

There are several indicators that suggest I'll be caught by IR35, including the fact that I've been employed by the client in a very similar role in the US. I'm going to operate on the basis that I'm caught...

That's not an indicator. To be caught by IR35 as an independent contractor you have to do three very silly things; allow the client to dictate what you do, where and most importantly how to do it, ensure that you are the only individual ever permitted to fulfil the contract (thereby turning a contract of services into a contract of service) and any of being allowed to be paid when there is no work to be done, to expect to be paid for doing no work and being unable to refuse to do work of any kind that the client wants doing. It also help if you have only ever had one client and never been exposed to financial risk by say currency fluctuations, perhaps because your client is not based in the UK. And, of course, not having a LtdCo, a business bank account or (perhaps) being VAT registered.

Right. So do we want to start again?

[SueEllen]

I think you can't be caught by IR35.
To be caught by IR35 HMRC must send questionnaire to your client overseas which is beyond HMRC's jurisdiction. And since your client is not based in UK it can ignore such requests of HMRC even if this happen

But if you go through an agency your agency could easily be based in the UK.

And not all clients are nice enough not to answer tax letters from a foreign country if they speak the language.

[dimazigel]

I think you can't be caught by IR35.
To be caught by IR35 HMRC must send questionnaire to your client overseas which is beyond HMRC's jurisdiction. And since your client is not based in UK it can ignore such requests of HMRC even if this happen

[centurian]

Ah so it's not literally employers' NI, but a separate tax to recoup the same money for HMRC

Broadly yes. Even if IR35 caught, you can still make dividend payments - you don't have to apply PAYE.

But at the end of the year, you will make a "deemed payment" calculation, which just happens to add up to the difference between PAYE and divs.

Where it gets a bit misleading - is if you make a "salary payment", you must apply PAYE to it and pay the cash to HMRC the following month/quarter. Although the total amount of tax/NI will be the same, you can be liable for late PAYE charges & interest.

[ASB]

Ah so it's not literally employers' NI, but a separate tax to recoup the same money for HMRC... even if the client would never be paying that money I still have to if caught. Makes sense.

Thanks

I must admit I have pondered that a bit; given most of the work I did was for non UK clients.

The underlying principle if that the implied contract between the provider and the end user of those services is one of employment. But under whose laws?

Say the foreign entity does not have a UK presence. I just wonder how you could really say it would be employment (at least as it is defined in UK legislation).

If you were say, an actual employee of a US company with no UK branch, but based in the UK, do you have employment protection? It would be an interesting challenge if you tried to claim unfair dismissal, or even redundancy when let go.

[d000hg]

IR35 is a personal tax paid by YuorCo, so where your client is doesn't matter.

Ah so it's not literally employers' NI, but a separate tax to recoup the same money for HMRC... even if the client would never be paying that money I still have to if caught. Makes sense.

Thanks

[malvolio]

Does Ir35 apply simply based on how you work, or is it dependent on where the client is? For instance if the client is not in the UK they wouldn't be paying employer NI if you were employed, [or] would they? In which case HMRC wanting you to pay said NI seems a bit much.

I'm discussing a fairly typical project with an EU-based client, I'd work 100% from home using my equipment and to my schedule... but as a software dev job they would be kicking tasks at me through Jira, and since it's me who impressed them they want me personally working on it, other than a certain sub-section of work which I could sub out.

If this was a UK-based client I'd be slightly concerned... setting my working hours and using my equipment is great, but lack of substitution (in real life, regardless of contract clauses) not so great.

IR35 is a personal tax paid by YuorCo, so where your client is doesn't matter. However you would be hard-pressed to get that working arrangement into an IR35-caught scenario without doing something really silly with the contract. Task-based is good, subbability is good, own kit is good, lack of D&C is good. Make sure the contract is between them and YourCo and contains a resaonbly unfettered RoS - they can't refuse a sutibaly experienced and capable replacement becuase he's not you, for example - and you won't have a problem.

Might be worth re-reading the PCG's Guide to Freelancing, which has been updated recently (and joining if you're not already inside), in business pointers are getting increasingly significant.

[d000hg]

Does Ir35 apply simply based on how you work, or is it dependent on where the client is? For instance if the client is not in the UK they wouldn't be paying employer NI if you were employed, [or] would they? In which case HMRC wanting you to pay said NI seems a bit much.

I'm discussing a fairly typical project with an EU-based client, I'd work 100% from home using my equipment and to my schedule... but as a software dev job they would be kicking tasks at me through Jira, and since it's me who impressed them they want me personally working on it, other than a certain sub-section of work which I could sub out.

If this was a UK-based client I'd be slightly concerned... setting my working hours and using my equipment is great, but lack of substitution (in real life, regardless of contract clauses) not so great.