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 reforms have been in effect for a few weeks now and your questions for Andy Vessey, Kingsbridge’s Head of Tax, are still coming in thick and fast. Andy has more than twenty years of experience working with IR35 and has defended more than 500 cases – winning most of them. What he doesn’t know about IR35 isn’t worth knowing, and so he really is the person to turn to when you have something to ask.
This week, Andy has been fielding questions on what happens if a contractor moves overseas, whether there are any implications to working for a foreign client, and whether or not you need tax indemnity insurance. So, read on for more information and, if you’d like to get your own question in before this blog series ends, head to the end to find out how.
Would IR35 apply where a contractor was previously based and engaged in the UK, but has now moved overseas, and will be working remotely and using a local solution e.g. Portuguese limited company (assuming they are based in Portugal)? The client is based in the UK. Will it hinge on whether the contractor is deemed a non-resident and it will take time for the contractor to break their link with the UK? Is there any time period we should mandate or anything else we should look at e.g., it’s been over 12 months, no UK limited company, no UK home?
If you, the worker, are a non-UK resident for tax purposes by virtue of the tests set out Statutory Residence Test then IR35 will not apply. Basically, if you spend less than 183 days of the tax year in the UK and meet any of the automatic overseas tests, then you will not be a UK resident.
I am a UK resident and have a contract with a French company that has no legal entity in the UK. They pay me directly from France. My duties are as sales manager for EMEA and North America. In normal times I would be travelling a lot for them. I can work from anywhere and choose my own hours. Where do I stand regarding IR35?
As your end client has no UK connection, you are responsible for self-assessing your IR35 status. This will require you to take into account all the relevant tests of employment status. As part of your tax obligations, you must be able to demonstrate to HMRC, if challenged, that you have carried out IR35 due diligence. This could be discharged in a number of ways, i.e., having your contractual and working practices reviewed by an IR35 expert such as Kingsbridge, or running your working arrangements through an online status tool such as the one Kingsbridge has developed.
Controlling your working time is a good starting point but it is only one element of the right of control test and there are other status tests to consider.
Do I need to provide indemnity to a listed firm who are hiring me for discrete pieces of work that are well outside IR35? I believe that I should not owe a listed company payment for being investigated because they will not be investigated because of me. If they are, it will be a larger issue, and I may come out fine and they may not on other contracts. So I think it is flawed logic on their part.
This is a legal matter which I am unable to comment on but if your end client is making it a stipulation of the contract that you must hold tax indemnity insurance before they will engage you, then you may have no option if you wish to take up the contract. This is not a unique situation, as many engagers are taking a belt and braces approach and adopting every protection that is available to them.
How to Ask Andy…
We’re keeping the Ask Andy blog series going throughout April, so if you have a question for Andy, there’s still time to get it in over the line. Simply head to our online form to submit your query.
If, on the other hand, you’re still wondering about your status determination, we can help with that too. Perhaps you’re not sure your end client has got your determination correct, or maybe you don’t have a clue what it should be. Either way, for just £50 plus VAT you can access the Kingsbridge IR35 Status Tool.
Our exclusive, award-winning tool has been developed by Andy himself and couldn’t be easier to use. Simply answer the carefully crafted yes/no questions about your contract and working practices, and the tool will give you an instant, accurate determination of inside or outside IR35. And if your case is borderline, it gets passed to one of our in-house experts for review, giving you the best of both worlds.
