Tax liability in Sweden & UK IR35 status - UK limited company Tax liability in Sweden & UK IR35 status - UK limited company
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  1. #1

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    Default Tax liability in Sweden & UK IR35 status - UK limited company

    Hi,

    I have my own UK limited company and signed a contract with a client (private small company) from Sweden. The contract has no end and will continue until one of the parties decides to terminate it. I'm working for this company full-time and I'm pretty much an employee except that I'm not an official employee. I'll be doing the work from home in the UK and travelling to Sweden isn't required.

    I'd like to ask for help in clarifying if there will be any tax liability in Sweden and whether I'm likely to be considered 'inside' for IR35.

    I've approached the client in regards to IR35 and have asked to either increase my fees to compensate for the Employer NI that my limited company will have to pay (assuming contract is 'inside' IR35) or to change the relationship at a fundamental level that would move it from 'inside' to 'outside' IR35.

    If someone could help clarifying these concerns that would be greatly appreciated. Please let me know if there's any more info required.

    Thanks in advance.
    Last edited by omicron; 19th September 2020 at 16:51.

  2. #2

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    You’re UK tax resident and have a UK company, so the contract is within the scope of IR35, yes, and you admit that you’re effectively an employee so, yes, you are probably caught and should be operating deemed payments. By all means, get a contract review, but you should be inside. Bear in mind that, for you, this situation won’t change in April 2021 when the new off payroll rules start. YourCo will still be liable unless the Swedish company has a UK office.

    You can’t expect the Swedish company to care about this. Why would they? It’s on you.

  3. #3

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    There are other factors to IR35 but the rolling contract with no end and the admission you are just an employee pretty much indicates inside I am afraid.
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  4. #4

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    Thanks for the replies so far.

    I've reached out to a couple of tax advisors but haven't heard back from them but I suspect it will probably be a waste of time. Here are the reasons why I believe my contract is inside IR35:

    • I can't hire someone else and have that person doing the job for this client. It has to be me, it's in the contract
    • It's my only client and I work full-time.
    • The contract specifies that I have to work 160 hours per month
    • Compensation is on a monthly basis and always the same amount
    • I do have holidays as a benefit although that's not part of the contract but they have verbally agreed to that
    • I have checked with HMRC's tool and the result was 'inside'


    The only things I can think of that could potentially consider me 'outside' is the fact that I bought my own hardware (a laptop) and a couple of software licenses. Also, they don't pay into my pension, holidays is the only benefit I have.

  5. #5

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    The three pillars are Direction and Control, Right of Substitution and Mutuality of Obligation (or lack thereof). You can't sub, sounds like they will just be telling you what to do when and it's a rolling contract with guaranteed hours.

    Couple of those like MoO are open for discussion but it could go either way. Issues with all three looks like a pretty clear inside. All the other things are just extras and aren't strong indicators. I know perms who use their own kit so that is not a great flag for example.
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    Get the contract off to QDOS and pay for their review and see what they have to say.
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  7. #7

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    Why does UK legislation apply to a contract with a company in Sweden? It's a direct B2B arrangement with no UK agency, so why does IR35 apply? Apologies if there's something fundamental I am not understanding.
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  8. #8

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    Quote Originally Posted by Fred Bloggs View Post
    Why does UK legislation apply to a contract with a company in Sweden? It's a direct B2B arrangement with no UK agency, so why does IR35 apply? Apologies if there's something fundamental I am not understanding.
    IR35 has nothing to do with where the client is based, rather where the work is done.

  9. #9

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    Quote Originally Posted by jamesbrown View Post
    IR35 has nothing to do with where the client is based, rather where the work is done.
    And UK legislation stops at the UK border. I don't really understand why anyone would deliberately decide to be in IR35 when HMRC cannot speak to the other contracting party. What evidence do HMRC have to say you are caught when the other contracting party are outside the UK with no UK presence? I certainly would not be so quick to declare myself caught when the UK authorities have no way to gather any evidence.
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  10. #10

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    Quote Originally Posted by Fred Bloggs View Post
    And UK legislation stops at the UK border. I don't really understand why anyone would deliberately decide to be in IR35 when HMRC cannot speak to the other contracting party. What evidence do HMRC have to say you are caught when the other contracting party are outside the UK with no UK presence? I certainly would not be so quick to declare myself caught when the UK authorities have no way to gather any evidence.
    Again, jurisdiction is completely irrelevant as it relates to the residency of the client company. It is YourCo under investigation, not ClientCo, including from next April. You also misunderstand where the burden of proof lies. If the client company is not willing to evidence what you’re saying, that is bad for you. You also misunderstand the hassle and stress of an investigation, regardless of the outcome.

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