Came across this excellent article while browsing Tax Adviser
The widening net | Tax Adviser
It's before they saw the draft legislation, but I don't think that changes anything substantive.
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Previously on "How do the proposed IR35 changes to private sector affect overseas clients?"
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Originally posted by WordIsBond View PostAre they suggesting that if a UK client is using a contractor who isn't in the UK that they still have to apply these rules? For non-UK contractors?
This will presumably be intended to avoid offshoring of a liability that is difficult to prosecute.
Originally posted by WordIsBond View PostIt could be (shocking and horrible speculation!!!) that they haven't actually thought aspects of this through????
In fairness, I suppose this is fairly edge case territory (not for us, but in general), and they will manly focus on having the liability pass to a UK entity, which is why I still believe that the new IR35 will work exactly like the old IR35 when there is no company in the contractual chain that has a UK presence (other than YourCo), i.e. the liability will ultimately rest with YourCo, not the overseas fee-payer (or client), and the assessment will rest with YourCo too, like the small company exemption.
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Interesting, and I see your point.
This part seems bizarre:
If only the client is in the UK then they will be the liable party.
Where a party in the contractual chain, including the client is outside the UK but the off-payroll worker performs services in the UK, fee-payers must still deduct tax and NICs.
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Originally posted by WordIsBond View PostI don't see how they can hold an overseas client liable if they have no UK presence. But will be interested to see what the legislation says.
Clark (H M Inspector of Taxes) v Oceanic Contractors Incorporated (1978-1983) 56 TC 183 | Croner-i Tax and Accounting
This is why you have PAYE Direct schemes, where the employee is responsible for setting up their own PAYE (or else registering as self-employed in the UK).
This is also why I said "I still think the latter may ultimately be the case".
However, when I read the IR35 consultation response, particularly this, I am left wondering:
If only the client is in the UK then they will be the liable party. Where a party in the contractual chain,
including the client is outside the UK but the off-payroll worker performs services in the
UK, fee-payers must still deduct tax and NICs.
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Originally posted by jamesbrown View PostThis is difficult to answer until we see the actual legislation later this year, but the direction of travel from the consultations appears to be that any UK intermediary would become liable first. However, it does seem that the overseas client would ultimately become liable in the absence of a UK intermediary, not including YourCo.
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This is difficult to answer until we see the actual legislation later this year, but the direction of travel from the consultations appears to be that any UK intermediary would become liable first. However, it does seem that the overseas client would ultimately become liable in the absence of a UK intermediary, not including YourCo.
My expectation had been that the current situation would apply in cases where there was no intermediary on the UK side, i.e. YourCo would remain responsible and liable. I still think the latter may ultimately be the case, but the consultations and other commentary suggest not (reading between the lines to some degree), so we’ll see.
Watching with some interest, as most of my clients are overseas, although I treat them all the same w/r to IR35 due diligence and get a full contract review plus signed CEST outside determination for any high value contracts.
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From my previously roles with contracts in the Isle of Man and Ireland in theory yes, but in reality it would be hard for them to pursue. Saying that, I always did my due diligence with IR35 contract reviews anyway just to make sure.
I would be much more concerned about keeping yourself on the right side of the tax implications of working in other countries.
Your point about Upwork is an interesting one. From what I've seen about these kinds of sites you will in effect be bidding for work so I struggle to see how you could be inside IR35, especially if you poorly and completely misinterpret the requirements and under-quote?
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This is relevant to some of my clients as well. I've assumed that HMRC has no authority or ability to enforce this. But I don't have any hard facts on that.
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How do the proposed IR35 changes to private sector affect overseas clients?
If a contractor gets a gig with a company outside the UK, even outside the EU, is that company still expected to understand IR35? Are they responsible for determining the contractor is outside IR35 and paying up if they're not? Would HMRC have any mechanism to actually go after an America/Australian/Chinese company?
For that matter, I know it's getting further away from how most UK contractors work but what about work through platforms such as Upwork? I know the reputation is it's awash with $5 Indian devs but there are people doing high-level, highly paid work through it as the platform matures.Tags: None
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