How does IR35 apply when working outside the UK?
One question that contractors are frequently asking via our Ask Andy form is when and how IR35 applies when working outside the…
The private sector IR35 reform is now very much a part of normal life for contractors, recruiters, and clients alike. But as expected with this complicated legislation, there are still questions being raised around IR35 – especially around overseas clients. You’ll be glad to know that our Head of Tax and resident IR35 expert, Andy Vessey, is still welcoming questions on all things IR35. Read on below to find out what Andy was asked in July, and how to submit your own questions to Andy.
This article is for information purposes only and should not be seen as financial advice. You should always consult with your accountant for any tax advice.
I have come across an article on your website regarding overseas end clients. I am in the process of securing a contract role for JP Morgan Chase, a global investment bank having entities in Ireland, the UK and the US. My services are entirely in Ireland, not a UK entity. I will be working remotely in the UK for a few days and flying to Ireland for 2-3 days a week. Is the Ireland end client exempt from IR35 rules? Will the UK entity be considered as a connection to the Ireland entity in the eyes of IR35?
For the off-payroll rules not to apply to an overseas client, the legislation requires that there is no UK connection by virtue of a UK permanent establishment (PE). The definition of a PE is the one set out in S. 1141 Corporation Tax Act 2010. This states that an overseas company will have a PE if:
– There is a fixed place of business through which its business is carried on;
– An agent in the UK habitually exercises authority to do business on its behalf.
A fixed place of business includes a place of management, a branch, an office etc, and will exist if the overseas company has a right to use a place of business in the UK and activities are undertaken at the place of business by the company. There is a likelihood therefore that the Irish business may be responsible for determining your employment status, but you should seek confirmation from them as no doubt they have already considered this issue.
I work in internal audit and I have both UK and Bulgarian citizenship. Currently, I am employed in the UK but I intend to relocate with my family back to Bulgaria. I’d like to continue working for my current UK employer on a contract basis using my own limited company, fully remotely from Bulgaria. I will be a non-UK resident for tax purposes as I will not spend more than 30 days during each tax year performing my work in the UK. Is there anything else I should consider or am I immune to IR35 as long as I maintain my non-resident tax status by living and working in Bulgaria?
You should follow all the relevant steps contained in the Statutory Residence Test and if you are a non-UK resident under these, then IR35 will not take effect as you will not be liable to UK tax on the contractual earnings. You do not state where your limited company is resident, and you will need to consider whether or not the company is liable to corporation tax on the income earned from your UK contract.
I am an IT contractor, a UK resident living in the UK, contracted by a UK agency and providing services to a UK end-user client. My contract is inside IR35.
I am moving to the Netherlands in August and planning to live and work there. I will request my residence and open a BV Company.
My UK client end user wants to extend me the contract and I am assuming that my contract extension will be outside IR35 because I will be a non-UK Resident, performing the work remotely from the Netherlands (I will never travel to the UK to provide my services). Is my assumption correct? Will my contract extension fall outside IR35?
Although strictly an individual is either resident or non-resident for the whole of a tax year, the tax year can be split so that an individual is regarded as either resident in the UK for part of the year and non-UK resident for the other part. As you are departing the UK, you will need to consider split year cases 1 – 3 as set out in HMRC guidance Residence, Domicile and Remittance Basis Manual. Split-year treatment can be complex but if you qualify for this, then IR35 should not apply to that period of the contract that falls within the period of non-residency.
How to Ask Andy…
Simply use our online form to submit your IR35 questions to Andy Vessey, and he’ll do his best to answer your questions right here on this blog.
And if you are unsure of your IR35 status and want to check the status of an engagement, you could use the award-winning Kingsbridge Status Tool. For just £50 plus VAT, our hybrid tool gives an instant result for clear-cut cases, and any indeterminate results are passed to our IR35 expert team for manual review. Plus, the tool has been developed by Andy himself.
