Working remotely for a UK client from an EU country

[jamesbrown]

This isn’t really a question about UK source income (it isn’t UK source income, it’s foreign source income of either a UK resident or a UK non-resident, depending on the facts). It's a question about how a specific client (edit: and fee payer) will react to IR35 post April 2021 and what the OP can do if and when they act contrary to the law.

[jamesbrown]

OP, you also mentioned there's an agency in the chain that might be flexible. If that's true, then the agency is probably the fee payer and will be both responsible and liable, in the first instance, post April 2021, so they also have a role in all this. As long as they're satisfied that they're operating within the law, then they could decide that an inside determination form the client does not mean a responsibility for them to operate a deemed direct payment (because it doesn't, necessarily). However, the client ultimately has the power in their relationship with the agency and, while the agency is liable first, the client is liable second, so that avenue might not work. Nevertheless, you could talk to them.

[skysies]

Overall, the best and correct approach is to convince the fee payer that deductions should not be made at all because it is not income subject to UK tax.

Well, that won't be so easy to do. I understand that I would get (if I ever do) the NT code after 1 year or so living and working abroad. But not the moment I start working remotely from outside the UK.

So how can I convince either the client or the agency in the first couple of months (or year) that they should not be doing deemed payments? The only thing that would have changed in that period would be my location, but not my tax status, right? How could they be convinced that I should be outside IR35? Just by telling them that I hope to get (in a year) the NT tax code?

That's why I keep asking if I could claim retrospectively the paid taxes working inside IR35 once I get the NT tax code.

[jamesbrown]

Well, that won't be so easy to do. I understand that I would get (if I ever do) the NT code after 1 year or so living and working abroad. But not the moment I start working remotely from outside the UK.

So how can I convince either the client or the agency in the first couple of months (or year) that they should not be doing deemed payments? The only thing that would have changed in that period would be my location, but not my tax status, right? How could they be convinced that I should be outside IR35? Just by telling them that I hope to get (in a year) the NT tax code?

That's why I keep asking if I could claim retrospectively the paid taxes working inside IR35 once I get the NT tax code.

No, they will apply your actual tax code. I think you can get an NT code as soon as you send your P85, assuming split year treatment. You may encounter clueless HMRC agents though, so I am not suggesting it will be smooth. I don’t think you need to wait a year. In terms of reclaiming NI, I think the main problem is the ErNI and, perhaps, the Apprenticeship Levy too. I doubt you will see those again. Again, I think we’re all emphasising that this is not the preferred route and you may not be made whole going this route. The difficulty is that, if you make a massive fuss, they can simply terminate your contract.

[skysies]

Again, I think we’re all emphasising that this is not the preferred route and you may not be made whole going this route. The difficulty is that, if you make a massive fuss, they can simply terminate your contract.

Well, I think this will become the norm for cases like mine. From what I have seen, I don't think clients will bother to consider individual cases when they are making a blanket decision. I don't think I will be treated in some "special" way. So it's very, very likely they will declare me inside IR35.

The question is what will come out of this discrepancy- working inside IR35 and having the NT tax code? I doubt the HMRC will provide any guidance on this, but who knows...

[jamesbrown]

The question is what will come out of this discrepancy- working inside IR35 and having the NT tax code? I doubt the HMRC will provide any guidance on this, but who knows...

I think the answer is that some tax will be taken upfront (NI, AL) and some portion of that may not be recoverable (perhaps ErNI, AL). The legislated appeals process is pretty weak and I cannot see HMRC caring about overpayment of tax.

[skysies]

I think the answer is that some tax will be taken upfront (NI, AL) and some portion of that may not be recoverable (perhaps ErNI, AL). The legislated appeals process is pretty weak and I cannot see HMRC caring about overpayment of tax.

Well, that seems like a real mess to me. So I will be on PAYE, but at the same time have the NT tax code?

In that context, would applying for A1 be a viable option? I rather pay national insurance in the country where I will be working than in the UK.

[NotAllThere]

Well, that won't be so easy to do. I understand that I would get (if I ever do) the NT code after 1 year or so living and working abroad. But not the moment I start working remotely from outside the UK.

I can't find the relevant page on the HMRC website, but I believe if you intend to leave the UK permanently, there is relief available such that your NT status begins as soon as you have left the country. It's certainly what I used 19 years ago...

Well, that seems like a real mess to me. So I will be on PAYE, but at the same time have the NT tax code?

In that context, would applying for A1 be a viable option? I rather pay national insurance in the country where I will be working than in the UK.

A1 won't help - that's about entitlement to draw on host country's social system, specifically for health. You'll still be liable to pay NI equivalent in your new country.

[ladymuck]

I can't find the relevant page on the HMRC website, but I believe if you intend to leave the UK permanently, there is relief available such that your NT status begins as soon as you have left the country. It's certainly what I used 19 years ago...

This?

Tax if you leave the UK to live abroad - GOV.UK

[jamesbrown]

Well, that seems like a real mess to me. So I will be on PAYE, but at the same time have the NT tax code?

In that context, would applying for A1 be a viable option? I rather pay national insurance in the country where I will be working than in the UK.

The NT code should apply once you’ve submitted your P85, I think. This would provide relief from PAYE taxes, but not NI. In short, you would avoid a deemed payment with a large chunk of tax removed, but some would be removed, and I’m not sure how easy it would be to get back. The ErNI, probably no chance, but I am not certain.