What are your clients doing with IR35 reform?

[Hobosapien]

The client is the one named in your contract and will be the one that has to make the IR35 determination unless they are exempt by being classed as a small business. This covers all scenarios including where the client has a contract to provide consultants or something else such as deliver an end product or service to a third party. The third party will not be named as the client in your contract so irrelevant for IR35 purposes.

The fee payer is the last entity in the chain before the contractor or their PSC gets paid. Usually an agency, umbrella, or client if direct.

I'm sure HMRC will provide some example scenarios to clarify the more convoluted situations, if they haven't already, but the above is the basic rule as far as I'm aware.

[westtester]

Had a chat with the big boss last week and he said I need to go permie when my contract expires (end of October) or leave. They're going through all the contract resource in the department and either converting them or kicking them out. Nothing to do with budgets and all about avoiding uncertainty over the IR35 legislation.

Potential for years worth of work but role is remote so going permie is not an option. Thanks a bunch HMRC.

[WordIsBond]

Yes. If the overseas company has a UK presence, the responsibility will lie with the UK company. However, if the overseas company has no UK presence, it will lie with the overseas company. The legislation states that the overseas company will be treated like a UK company. This is another area that I don't see working out well in practice.

It seems virtually unenforceable. How can HMRC hold one of my overseas clients (with no UK presence) responsible for making this determination? Suppose they say, 'Forget it, we aren't a UK company, we don't have any responsibilities to the UK tax authorities, we don't have to do this, it's up to you to make sure you've handled your tax liabilities, we don't have to do this and they can't assess any penalties on us, we aren't there. If they hassle us we just won't work with a UK company which is going to mean less revenue for them, anyway.'

What can HMRC do, anyway?

What about my US clients? They are the fee-payers, there's no agency involved. They'd start yelling, 'No taxation without representation,' playing Yankee Doodle, and throw a bunch of tea in Boston Harbor. Even if they agreed to make a determination, they have no mechanism to withhold UK taxes and send them to HMRC.

[BR14]

What about my US clients? They'd start yelling, 'No taxation without representation,' playing Yankee Doodle, and throw a bunch of tea in Boston Harbor. .

[jamesbrown]

It seems virtually unenforceable. How can HMRC hold one of my overseas clients (with no UK presence) responsible for making this determination? Suppose they say, 'Forget it, we aren't a UK company, we don't have any responsibilities to the UK tax authorities, we don't have to do this, it's up to you to make sure you've handled your tax liabilities, we don't have to do this and they can't assess any penalties on us, we aren't there. If they hassle us we just won't work with a UK company which is going to mean less revenue for them, anyway.'

What can HMRC do, anyway?

What about my US clients? They are the fee-payers, there's no agency involved. They'd start yelling, 'No taxation without representation,' playing Yankee Doodle, and throw a bunch of tea in Boston Harbor. Even if they agreed to make a determination, they have no mechanism to withhold UK taxes and send them to HMRC.

It ain't gonna work.

I assume it's there as a sort of finger wagging "don't try to offshore the liability", but it's pointless when there is no UK presence in the supply chain. They do have relationships with tax/revenue agencies in various countries, but I think the chances of enforcing such a complex piece of legislation on a company with no UK presence is next to zero.

I had expected them to retain the status quo w/ IR35 for overseas clients and have the PSC make the determination and remain liable (up until the point I saw their consultation responses). It's really surprising to me that there is no liability on the PSC under any circumstances except fraud. As things stand, there is no effective liability on the overseas company too, so IR35 has now become a "meh" for a fully overseas supply chain with a UK PSC, I think. I'll still continue my due diligence for contracts w/ overseas clients, but I'm not going to lose any sleep over it and, come April 2020, it's a definite "meh" from me too.

[WordIsBond]

It ain't gonna work.

You're laughing, but at least one of my clients would do all of the above (except the tea) and wave a flag while at it. Actually, he might even do the tea, he's not that far from Boston and he'd do it just so he could send me (and King George III) a video.

As far as I can see the legislation puts no responsibility on me to communicate with overseas clients on this. QDOS had something that said we should, but why? If HMRC is going to convince HMG to bring forward stupid legislation, they can send the good news themselves to countries around the world.

"Dear Foreign Companies,

We have a law we want you to help us enforce. We don't understand it ourselves which is why we lose most of the cases that go to tribunal. We have an online tool to determine what you are supposed to do. After you use it, you will then know whether you are to withhold taxes on payments you make to British contractors -- and then, you can send the money to us.

The tool doesn't always work well, by the way. But we will hold you liable if you get this wrong.

With much love, affection, and respect,
HMRC"

[Grasser73]

Got this email from ClientCo today.

What we are doing?

We are working hard to ensure we have the necessary processes and support in place to implement these changes as soon as possible. We need to ensure all our contractors operate under the correct IR35 status, minimising the risks to them and to ourselves.

As well as creating an environment that helps our contractors comply with legislation, we have also engaged with IR35 compliance experts, Orange Genie Compliance, who will help us deliver training and workshops to ensure all stakeholders have the information they need about the changes.

Hiring managers and contractors will be invited to these workshops which are taking place at the end of August. We are also asking contractors to complete an online survey to help us gather a picture of the IR35 status ahead of the changes next year.


Obviously it remains to be seen how this will resolve but at least they are aware of and have started the process.

[GhostofTarbera]

Had a chat with the big boss last week and he said I need to go permie when my contract expires (end of October) or leave. They're going through all the contract resource in the department and either converting them or kicking them out. Nothing to do with budgets and all about avoiding uncertainty over the IR35 legislation.

Potential for years worth of work but role is remote so going permie is not an option. Thanks a bunch HMRC.

Remind the big boss they will be on hook if they convert these contractors to permits for past tax bills


Sent from my iPhone using Contractor UK Forum

[jamesbrown]

You're laughing, but at least one of my clients would do all of the above (except the tea) and wave a flag while at it. Actually, he might even do the tea, he's not that far from Boston and he'd do it just so he could send me (and King George III) a video.

As far as I can see the legislation puts no responsibility on me to communicate with overseas clients on this. QDOS had something that said we should, but why? If HMRC is going to convince HMG to bring forward stupid legislation, they can send the good news themselves to countries around the world.

"Dear Foreign Companies,

We have a law we want you to help us enforce. We don't understand it ourselves which is why we lose most of the cases that go to tribunal. We have an online tool to determine what you are supposed to do. After you use it, you will then know whether you are to withhold taxes on payments you make to British contractors -- and then, you can send the money to us.

The tool doesn't always work well, by the way. But we will hold you liable if you get this wrong.

With much love, affection, and respect,
HMRC"

Well, indeed.

It's almost as though it's a complete afterthought. I suppose it's not that surprising. The only overseas loophole that would matter to them would be an overseas fee payer with a UK client, and it's clear what happens in that case (the UK client is liable). Basically, a UK client cannot offshore the risk. Ultimately, there's feck all they can do about a fully overseas supply chain other than retain the existing regime, and they chose not to do that for some reason.

It's possible that it might receive a technical change or two as it passes through Parliament. Or not.

Frankly, I don't care if it remains as-is. It's basically saying: if you have a fully overseas supply chain, forget about IR35.

[Maslins]

Re fully overseas clients, I always thought they were as good as safe from IR35 anyway. Reason being it's very hard to control someone who works remotely hundreds/thousands of miles away. Perhaps not a complete silver bullet, but would seem a high bar for HMRC to overcome.

Of course I'm not suggesting that this could cover convoluted scenarios like contractor working in the building of UK HSBC but get agreement to invoice US/France/whatever HSBC and be safe.