Contracting for small company that is part of a larger group - new IR35 doesnt apply?

[yorkshirespud]

You can formally request the client to confirm their size where you have
directly contracted with the client

That sounds like the action I need to take ...

[eek]

From HMRC's Agency Workshops

Outside the public sector, only medium and large-sized organisations will need
to consider the rules. The size of agencies in the contractual chain does not
matter - they have their own responsibilities

Client size is determined by small companies' rules set out in the Companies
Act 2006

Groups of companies are determined by the size of their parent company

Wholly overseas clients do not need to consider the off-payroll working rules

You can formally request the client to confirm their size where you have
directly contracted with the client

[yorkshirespud]

I have a contract with a client (direct, no agency) that is a small UK company (meets at least 2 of 3 of the Companies Act 2006 definitions for a small company), but the client company is a subsidiary of a larger group, where the parent company is not a small company.

My understanding is that the new IR35 (post April 2021 - Chapter 10 of Part 2 of ITEPA 2003) does not apply in this case, and that the old 2000-era (Chapter 8) rules apply - i.e. my Limited Company must make a determination if IR35 applied, not the end-client.

I have read several blogs which have differing points of view:

• Some say that the 'smallness' of a company is decided by the size of the ultimate parent
  • https://www.bdo.co.uk/en-gb/insights...nies-exemption
• Others say that if the end-client is a small subsidiary, any parent companies can be ignored

Ignoring blogs and looking directly at the legislation:

• Finance Act 2020
  • https://www.legislation.gov.uk/ukpga...part/2/enacted
• Finance Bill 2021
  • (Not yet law but passing through parliament now - 2nd reading)
    • https://bills.parliament.uk/bills/2835
  • https://publications.parliament.uk/p...270/200270.pdf

There is nothing in any of the current or proposed actual law that says the small company exemption doesn't apply to subsidiaries with non-small parents.


So it looks to me, as long as clients use a 'small company' subsidiary to engage services, that the new IR35 / Chapter 10 rules of the client being obligated to make an SDS determination do not apply, and the old/current/Chapter 8 rules of the engaged being responsible for IR35 still apples.


Any views?