Reply to: Client in Europe but work carried out in UK - is IR35 April 2020 relevant?

[jamesbrown]

True. But worth remembering this:

Oh, sure, I wouldn't even try to make sense of tax law. But you'd hope that companies would make a better effort to do more sensible stuff when it saved them money. Still, we all know that a lot of companies are pretty stupid too (and of foreign tax policy, legitimately clueless).

[WordIsBond]

FWIW, it would make no sense for an overseas fee payer to apply PAYE/NICs as though inside, as there are no employer NICs for an overseas company, ordinarily. Would make far more sense for the contractor to operate a DPNI scheme and pay EeNI + PAYE.

True. But worth remembering this:

Many things in life make no sense. Tax authorities are involved in a disproportionately high percentage of them.

[jamesbrown]

I've now wrapped up all UK contracts. I can get work overseas and that's what I'll be doing until the UK tax regime returns to sanity or until I retire. I'm assuming that liability lies with MyCo, whatever the legislation says, and ensuring working practices keep me outside and that I have a paper trail to prove it.

Agree, I am doing likewise.

FWIW, it would make no sense for an overseas fee payer to apply PAYE/NICs as though inside, as there are no employer NICs for an overseas company, ordinarily. Would make far more sense for the contractor to operate a DPNI scheme and pay EeNI + PAYE.

[simes]

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.

Good point! Fair play.

Will do.

Thanks.

[WordIsBond]

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.

[simes]

Just to be clear (JB alluded to it), you are not necessarily outside. That depends on contract and working practices, as always.

Many thanks.

Yes, and to be clear from my side, my contract and working practices are Outside - which will certainly cover me to April.

But after April, your known unknowns aside (HMRC's efforts and trade deals), I am covered due to border restrictions.

However, I might ask why you believe that even IF the HMRC efforts and trade deals all magically come off, why they would then make the exception and say that I am personally liable, post April. Their entire thrust is to make the client liable post April.

[WordIsBond]

This is currently exactly my situation too Chimp.

I am told, and I believe, that HMRC's jurisdiction ends at the borders. They can't dictate what foreign clients do. Therefore, am Outside.

Just to be clear (JB alluded to it), you are not necessarily outside. That depends on contract and working practices, as always. If the legislation remains as is and JB's interpretation is correct, the liability if you are found to be inside resides with your foreign client, which HMRC might have difficulty reclaiming from, but perhaps trade deals might impact that in future. There is a risk, either through tweaks to the legislation or through aggressive action by HMRC, that the liability could come back to you.

I've now wrapped up all UK contracts. I can get work overseas and that's what I'll be doing until the UK tax regime returns to sanity or until I retire. I'm assuming that liability lies with MyCo, whatever the legislation says, and ensuring working practices keep me outside and that I have a paper trail to prove it.

[simes]

My opinion is that you can class yourself outside IR35 then.

Just my opinion though. A bit like HMRC's opinion - it's not actually law

Even HMRC's law is subject to treacly fluidity and the direction of the wind ...

[ChimpMaster]

I do. Based in NL.

My opinion is that you can class yourself outside IR35 then.

Just my opinion though. A bit like HMRC's opinion - it's not actually law

[jamesbrown]

Many thanks for this.

As for the quoted bit... 'The HMRC to clarify anything' must surely be a contradiction in terms...!

Well, yes. So, they might not. FWIW, my money is on them not clarifying, but if they were to make small changes, this would be one to look for.

[simes]

It is precisely the sort of small clarification that might be expected. If they do clarify, it will probably be to indicate that a wholly overseas supply chain follows the small companies route.

Many thanks for this.

As for the quoted bit... 'The HMRC to clarify anything' must surely be a contradiction in terms...!

[simes]

Do you have an agency in between? i.e. might they be liable to provide the SDS to you?

I do. Based in NL.

[jamesbrown]

Do you have an agency in between? i.e. might they be liable to provide the SDS to you?

Right, if there is any UK entity in the supply chain, other than the PSC, then the responsibility and liability rests there. The draft legislation is clear about that much.

[jamesbrown]

This is currently exactly my situation too Chimp.

I am told, and I believe, that HMRC's jurisdiction ends at the borders. They can't dictate what foreign clients do. Therefore, am Outside.

Whether your working practices are inside or outside is a matter of fact, rather than your opinion, but I understand what you mean. The problem with the draft legislation is that, in making an overseas company responsible and liable (they do), and without allowing for a transfer of liability to the PSC (they don't), except in cases of fraud, they have essentially off-shored the risk. Practically speaking, they will not be able to enforce this on a deemed resident company or to collect from any company that is actually UK resident. Then again, we're talking about a tiny fraction of the market and a low-risk fraction at that. It would be quite hard to paint yourself inside IR35 on a contract delivered remotely to an overseas client, but not impossible.

We'll see if the enacted legislation clarifies this. It is precisely the sort of small clarification that might be expected. If they do clarify, it will probably be to indicate that a wholly overseas supply chain follows the small companies route.

[ChimpMaster]

This is currently exactly my situation too Chimp.

I am told, and I believe, that HMRC's jurisdiction ends at the borders. They can't dictate what foreign clients do. Therefore, am Outside.

Do you have an agency in between? i.e. might they be liable to provide the SDS to you?