Overseas and IR35

[rocktronAMP]

The above is mostly nonsense or based on draft legislation that will be amended shortly. The recently concluded review promises to apply the small companies provisions to a fully overseas supply chain, i.e. the PSC will remain responsible and liable. However, if there is a UK presence above the PSC, that entity is the Fee Payer.

Thanks for that reply Jamesbrown.

So to recap, according to the current review of the draft legislation, the PSC is then the determiner of Inside or Outside IR35 if the Fee Payer is wholly abroad foreign (with no UK presence whatsover) AND ONLY IF the supply chain is direct B2B. If any of the payment supply chain crosses the UK border / jurisdiction, then the contract is caught.

From your answer though, there was no mention of Statement of Work (SOW). Does SOW have anything to do with IR35 determination then?

[jamesbrown]

Thanks for that reply Jamesbrown.

So to recap, according to the current review of the draft legislation, the PSC is then the determiner of Inside or Outside IR35 if the Fee Payer is wholly abroad foreign (with no UK presence whatsover) AND ONLY IF the supply chain is direct B2B. If any of the payment supply chain crosses the UK border / jurisdiction, then the contract is caught.

From your answer though, there was no mention of Statement of Work (SOW). Does SOW have anything to do with IR35 determination then?

I think you’re mixing up a few things.

First, being required to assess IR35 does not mean being caught.

Second, things like B2B and SoW are about the details of the working arrangements and are orthogonal to whether an assessment should be carried out.

Anyway, to simplify, it’s like this. If the supply chain is fully overseas, it’s BAU - the PSC is responsible for the assessment and liable for getting it wrong. The assessment could be inside or outside. The reality could be inside or outside. The assessment could be wrong. If it’s wrong, the PSC is liable. If there is a UK entity in the supply chain, that entity is the Fee Payer. The Fee Payer is responsible and liable for operating PAYE correctly. The assessment could be inside or outside. The reality could be inside or outside. The assessment could be wrong. If it’s wrong, the Fee Payer is liable.

[abz2020]

How is IR35 applicable to number 4?
If the contractor is UK resident, but both end client and contractor's LTD are EU based (even in 2 different EU states).
Surely only UK personal income tax should apply to the contractor for income of EU LTD.
No?

[jamesbrown]

How is IR35 applicable to number 4?
If the contractor is UK resident, but both end client and contractor's LTD are EU based (even in 2 different EU states).
Surely only UK personal income tax should apply to the contractor for income of EU LTD.
No?

While it’s a company tax, it’s applied according to the residency status of the worker, because that determines whether there is a charge to tax. More importantly, in that situation, the PSC is probably UK resident because it is centrally controlled and managed in the UK.

[abz2020]

While it’s a company tax, it’s applied according to the residency status of the worker, because that determines whether there is a charge to tax. More importantly, in that situation, the PSC is probably UK resident because it is centrally controlled and managed in the UK.

Are you saying that if a EU company has its' (only) worker/director as UK resident and work is done in the UK (for non UK client) that said EU company must pay corporation tax in the UK?
I am not sure how will this work in practice in conjunction with company's home tax authorities.

Anyway the question was about if IR35 applies to this set up.

[eek]

Are you saying that if a EU company has its' (only) worker/director as UK resident and work is done in the UK (for non UK client) that said EU company must pay corporation tax in the UK?
I am not sure how will this work in practice in conjunction with company's home tax authorities.

Anyway the question was about if IR35 applies to this set up.

If I go and work in Holland I'm subject to Dutch rules which mean I can't use my limited company and need to pay tax in Holland.
If I go and work in Denmark - I'm subject to Danish rules which means I need to pay tax in Denmark.

The same is true for the UK, if you (live and) work in the UK you need to pay tax in the UK.

I avoided moving to Northern Ireland years ago because that would have meant dealing with Eire tax rules if I had to take work in Dublin.

[abz2020]

If I go and work in Holland I'm subject to Dutch rules which mean I can't use my limited company and need to pay tax in Holland.
If I go and work in Denmark - I'm subject to Danish rules which means I need to pay tax in Denmark.

The same is true for the UK, if you (live and) work in the UK you need to pay tax in the UK.

I avoided moving to Northern Ireland years ago because that would have meant dealing with Eire tax rules if I had to take work in Dublin.

Yes, but do you mean personal tax rules or corporate tax rules?
I agree for personal tax rules.

[jamesbrown]

Are you saying that if a EU company has its' (only) worker/director as UK resident and work is done in the UK (for non UK client) that said EU company must pay corporation tax in the UK?
I am not sure how will this work in practice in conjunction with company's home tax authorities.

Anyway the question was about if IR35 applies to this set up.

Yup.

But, tax treaties.

I already answered your first question. It does.

[rocktronAMP]

I think you’re mixing up a few things.

First, being required to assess IR35 does not mean being caught.

Second, things like B2B and SoW are about the details of the working arrangements and are orthogonal to whether an assessment should be carried out.

Anyway, to simplify, it’s like this. If the supply chain is fully overseas, it’s BAU - the PSC is responsible for the assessment and liable for getting it wrong. The assessment could be inside or outside. The reality could be inside or outside. The assessment could be wrong. If it’s wrong, the PSC is liable. If there is a UK entity in the supply chain, that entity is the Fee Payer. The Fee Payer is responsible and liable for operating PAYE correctly. The assessment could be inside or outside. The reality could be inside or outside. The assessment could be wrong. If it’s wrong, the Fee Payer is liable.

I had read your paragraphs several times over. Thank you.

In other words, it's not magic! I got it.

1) Assessment == reality
2) Assessment != reality

SOW does not guarantee the assessment or whether it should be taken out.

Say a 6 month contract from Europe comes into the inbox for the equivalant £600 per day + VAT. You are UK LTD contractor resident in the UK. You perform the duties remotely. You get access to their Github source code and deliver the development, or build a website in React and Angular deliver to the client over Dropbox or deploy it to Amazon Web Service (cloud). Anyway details, details... In order to protect yourself, could your PSC volunteer to pay Employer NI to the authorities ahead of time? The LTD PSC has one employee (contractor) therefore the NI comes from the basic annual salary say £12,000. LTD still pays Corporate Tax as in the pre-2020 legislation era. By volunteering yourself for a sort of Off Payroll working is that a [future] strategy, might be delay any investigation. I am thinking the authorities would go after low-hanging fruit first of all and spend much of their human time and energy chasing those folk...

[Lance]

I had read your paragraphs several times over. Thank you.

In other words, it's not magic! I got it.

1) Assessment == reality
2) Assessment != reality

SOW does not guarantee the assessment or whether it should be taken out.

Say a 6 month contract from Europe comes into the inbox for the equivalant £600 per day + VAT. You are UK LTD contractor resident in the UK. You perform the duties remotely. You get access to their Github source code and deliver the development, or build a website in React and Angular deliver to the client over Dropbox or deploy it to Amazon Web Service (cloud). Anyway details, details... In order to protect yourself, could your PSC volunteer to pay Employer NI to the authorities ahead of time? The LTD PSC has one employee (contractor) therefore the NI comes from the basic annual salary say £12,000. LTD still pays Corporate Tax as in the pre-2020 legislation era. By volunteering yourself for a sort of Off Payroll working is that a [future] strategy, might be delay any investigation. I am thinking the authorities would go after low-hanging fruit first of all and spend much of their human time and energy chasing those folk...

maybe..
That's lots of money, to possibly reduce the risk of an investigation, whilst not actually addressing the risk/impact of being found wanting in said investigation.