View Full Version : best IR35 structure for a non domocile individual

16th August 2004, 16:31
Hi People,
I have just accepted a contract in the uk that is inside IR35 :x

However, as I'm Irish and coming to work in the uk I'm considered to be non domicile. What this means is that I do not have to pay tax on any income or dividends derived overseas etc. as long as it is not brought into the uk while I'm here. :D (taxed on a remittance basis is the term)

Now I have to assume that there is somehow that I can get some good out of this situation. For instance there must be someone that sets up brolly companies overseas where although all my income would be taxed independent of me bringing it into the country (as it was earned here) however, maybe the dividends or other forms of payment do not suffer from the same taxes and may escape the wrath of the IR35 taxes.

Maybe it's simply a case of finding an international pension scheme that I cash in before I return to Ireland or the like.

any ideas ?

BTW I intend to stay in the uk for 3 years.
Hear's hopin'

16th August 2004, 17:13

As you intend to stay in the UK for three years it's likely that the UK Revenue will say you are habitually or ordinarily resident here. That means that certain anti-avoidance legislation prevents you from transferring earnings to a non-UK company so that it isn't taxed here.

In any event I think that any overseas company would find it very hard to avoid corporation tax or the operation of PAYE/NIC on its UK operations. If they say they can then they're probably lying or are burying their heads in the sand.

Any overseas company operating here with you as an employee should be operating UK PAYE/NIC.

That means they have to keep payroll records in accordance with IR35

That means that you'll pay PAYE/NIC on 95% of what's billed.

However, it may be possible to apply for a NT tax code here on the basis that you'll be paying the same/more tax in Eire/elsewhere on what's billed which means that you don't pay any UK tax (ee's NIC still chargeable).

16th August 2004, 18:17
Hi Bradley,
Thanks for the points. However, this still leaves me with a number of questions. eg.

If I intend to stay for 2 years then I will not be ordinarily resident(OR), and if it slipped into the third year I would only be OR from the start of the 4th year. If I am non OR then this may have an impact.

However, even if I am OR but non Domicile then I am still not taxed on my world wide income (if not brought to the uk). Also I'm not trying to rid my self of all tax (well really I am but I know it's not possible legally) I'm only trying to find a structure that in which I pay less tax than under IR35.

As an example, if i was an employee of an offshore company and they payed me an income which then becomes wholly taxed in the uk. However, any dividend would be may be considered as worldwide income. Therefore not taxable as long as not brought into uk. Would this be considered 100% legal ? Or is the uk revenue allowed to view this structure transparently and view everything as income ?

Basically I can see that the EBT schemes (may/may not) have some issues as the monies have to go through a lot to make it to the uk. However, my situation is different and may allow more flexibility to find a 100% legal and safe method to pay less tax than under IR35.

Or it may be the case the that EBT schemes safe for me if I do not take the funds on shore.

I can't see any benefit for me over a normal uk individual in taking the self employed to an offshore company route. Unless maybe if I was the sole shareholder.

Any thoughts?

17th August 2004, 09:51
The question really is how legit you want to be. From a POV of IR35 you assert that the contract will be caught. In this case, according to the IR35 rules, you are pretty much stuffed. Irrespective of any structure you put in place there is some wording which effectively says "could reasonably be taken to be income as derived from the contract". If push came to shove could you defend your position in court?

Opposed to this there are a lot of people who are of the opinion that offshore, small salary, EBT loans etc are all OK. Fiddleabout has done some research in this area and may have some info on his ************ site - link at the top.

Another extreme could be that you simply bill from your favourite tax haven via a Nominee company - IOM, CI, Monaco, Malta, Panama, Belize etc etc and transfer the cash to a private bank in a different jurisdiction. Bankcards and cash then become useful. There are two major disadvantages with this though. You will have great difficulty getting an agent to accept the invoices and you will probably get locked up when/if you get caught. [Of course you could do just the same thing with a UK company and people do, gets over the first hurdle, but much more likely to get locked up when caught]

Between the extremes there may be some structures that you could use (although Ramsey - the nearest we have to GAAR) could probably defeat most of them if the IR wanted to try).

In your position some serious advice from international specialists may be useful (although the sums involved may make that cost-ineffective). You also have to be careful not to stuff up your Eire position as well. Be as well to sort out your position before you arrive too.

17th August 2004, 10:17
I've got to agree with ASB here - if you're IR35 you're stuffed.

How about making sure that you're IR35 by using Qdos/Lawspeed review services for example?

If you were outside IR35 you could probably avoid most UK taxes except some CT.

PS EBTs are getting looked at very closely by the Revenue at the moment. To work you must effectively give your contract income away to the Trust. With that there should be a risk that you'll never see the money again otherwise they'll just deem the income to be subject to PAYE.