Reply to: IR35 - Switching Tax Residency Overseas But Staying With UK Client

[Lance]

That may apply to a complete offshore model where he doesn't work a day in the UK. How about if he becomes a non-tax resident in the UK and comes here occasionally to work for his client?

That would still be an export of services, with the added complication of having to prove a right to work.

[skysies]

All great until the sunlit uplands when you suddenly find that you're an exporter of services to a country outside the EU.

That may apply to a complete offshore model where he doesn't work a day in the UK. How about if he becomes a non-tax resident in the UK and comes here occasionally to work for his client?

[Lance]

Move to Romania(part of EEA, no VAT), corp tax is 2-3%, cost of life is 1/3 of here. Weather is nice with hot summers, snow in winters.
Mountains and seaside at 2h distance. Infrastructure is a bit poor and people are a bit difficult sometimes.
Stick to a good accountant.

All great until the sunlit uplands when you suddenly find that you're an exporter of services to a country outside the EU.

[WordIsBond]

IR35 would still apply if I work for ONE client only.

I don't think anyone has addressed this but this is completely wrong. Having more than one concurrent client could help you make the case that you are in business for yourself, rather than a disguised employee, but it is not a silver bullet. IR35 has to be considered whether you have one client or five.

[skysies]

I think you are the one misunderstood. If you pass them then you go to the UK Tests, then if you pass them you go to the Sufficient Ties Tests.



It doesn't matter about the UK or Sufficient Ties Tests, if you fail the automatic overseas tests, its game over.

Sorry, but that's complete crap. If you fail the overseas tests, you go to the UK tests. By fail, I mean you answer NO to the questions.

If you pass, or answer YES, to the UK tests, you are considered a tax resident. One example is the question: Present in UK >183 days in the current tax year.

[Jolie]

Seems there's a lot of hearsay and misleading information on that forum

The 90 days refer to the Automatic Overseas Tests. If you fail them, then you go to the Automatic UK Tests and Sufficient Ties Tests.

I certainly can be here more than 90 days, and work more than 30 days and still be non-resident for tax purposes!

I think you are the one misunderstood. If you pass them then you go to the UK Tests, then if you pass them you go to the Sufficient Ties Tests.

You’ll not be considered resident in the UK for the whole tax year if you do not meet any of the following:

the automatic overseas tests
the automatic UK tests
the sufficient ties test

It doesn't matter about the UK or Sufficient Ties Tests, if you fail the automatic overseas tests, its game over.

[skysies]

Non-residency for tax requires you pass a number of tests, one of which is that you must not be in the UK more than 90 days per year, and no more than 30 of those for work purposes. If you are working on your client site for 3 days per week, then you are tax resident and IR35 applies.

Seems there's a lot of hearsay and misleading information on that forum

The 90 days refer to the Automatic Overseas Tests. If you fail them, then you go to the Automatic UK Tests and Sufficient Ties Tests.

I certainly can be here more than 90 days, and work more than 30 days and still be non-resident for tax purposes!

[jamesbrown]

Just to further clarify on your comment, you were referring to UK based dividends income and capital gains, which of course would come under "other" income.

I was referring to income earned abroad from the work you do for the UK client.

Right, income earned abroad (when not UK tax resident) is taxed abroad and no further tax should be due on return. The anti-avoidance legislation is purely designed to stop someone moving abroad for a minimum period of non-residence in order to avoid CGT or dividend tax.

[Jolie]

The temporary non-residence rules also apply to dividends, but they apply to (dividends on) profits and (gains on) assets held prior to departure. It's also worth noting that "5 years" is a shorthand for something significantly more complex.

Just to further clarify on your comment, you were referring to UK based dividends income and capital gains, which of course would come under "other" income.

I was referring to income earned abroad from the work you do for the UK client.

[Jolie]

The temporary non-residence rules also apply to dividends, but they apply to (dividends on) profits and (gains on) assets held prior to departure. It's also worth noting that "5 years" is a shorthand for something significantly more complex.

Agreed, the wording specifically states income from employment, so if you have a company setup abroad you may be liable for dividends income.

[jamesbrown]

Completely agreed, but it's also possible to return within 5 years and not be liable for income earned abroad, but you would be liable for certain capital gains. This is where having a good accountant is really worth their fee.

The temporary non-residence rules also apply to dividends, but they apply to (dividends on) profits and (gains on) assets held prior to departure. It's also worth noting that "5 years" is a shorthand for something significantly more complex.

[Jolie]

If you leave and all indications are you plan to leave permanently (i.e. not return within 5 years), you'll be considered non-tax resident immediately. While it's possible to do this and, e.g. rent out your house rather than selling it, the more ties you have, the more the risk of being labelled tax resident in the UK as well.

Completely agreed, but it's also possible to return within 5 years and not be liable for income earned abroad, but you would be liable for certain capital gains. This is where having a good accountant is really worth their fee.

If you return to the UK within 5 years

You may have to pay tax on certain income or gains made while you were non-resident. This doesn’t include wages or other employment income.

[Jolie]

That seems like a dodgy scheme to me. All income generated in the UK should be taxed at source, meaning in the UK. The IR35 would also appy in that case. I just can't see how the UK client will decide to put you outside of IR35, if all their other contractors are on PAYE.

Not dodgy at all.

If you are not tax resident in the UK and you work in the UK you are still liable for tax, and IR35 would then apply.

If you don't come to the UK to work, but your client is in the UK, then IR35 does not apply. It's simply a business to business supply from an overseas contractor to a UK company.

Non-residency for tax requires you pass a number of tests, one of which is that you must not be in the UK more than 90 days per year, and no more than 30 of those for work purposes. If you are working on your client site for 3 days per week, then you are tax resident and IR35 applies.

[BlasterBates]

That seems like a dodgy scheme to me. All income generated in the UK should be taxed at source, meaning in the UK. The IR35 would also appy in that case. I just can't see how the UK client will decide to put you outside of IR35, if all their other contractors are on PAYE.

Not it isn't dodgy, ask your Accountant. If you work remotely in France for a UK company, the French tax authorities will expect you to pay tax in France. You will then not be liable for tax in the UK. Your Accountant has given you advice on the basis of you carrying out the work in the UK. You will still have to declare your income from the UK in the country you are resident, and they will probably ask for proof of you travelling to the UK to do the work. If you do not provide proof they will tax you on the earnings.

The fact is regardless of where you work you will be subject to tax, it is just a question of in which country. If you are not familiar with cross border working you can get into a lot of trouble. You need to be very careful if you decide to work remotely for the same client.

[jamesbrown]

That seems like a dodgy scheme to me. All income generated in the UK should be taxed at source, meaning in the UK. The IR35 would also appy in that case. I just can't see how the UK client will decide to put you outside of IR35, if all their other contractors are on PAYE.

As I said, you’re deeply confused about various things. Why not speak to a specialist, rather than rely on a contractor forum about something this important and comparatively complex? You must be chargeable to UK tax in the first instance (deeming is a charge to UK tax) and whether you are or not is a matter of fact (Statutory Residence Test).

The last point you make is a completely separate one and the the supply chain above you may indeed not be willing to risk that you become chargeable to UK tax at some point during the contract. It is easier for them to ignore outliers like you. FWIW, if you are regularly working from the UK or have other ties to the UK, you may well be resident for UK tax purposes, but that is the first thing to establish.