UK Agent- UK PSC - Foriegn client - Non UK resident worker - IR35 applies or not? UK Agent- UK PSC - Foriegn client - Non UK resident worker - IR35 applies or not?
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  1. #1

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    Default UK Agent- UK PSC - Foriegn client - Non UK resident worker - IR35 applies or not?

    So I haven't seen a specific reliable answer to this conundrum, which I suspect will apply to many contractors, can anyone give an opinion?

    Situation:

    - I am a UK non resident and not ordinarily resident consultant in the Telecoms field.
    - I am working via my own UK PSC.
    - I have a contract to supply services to a client via a UK agency.
    - The end client is a non UK company. (In Romania)
    - The actual work is carried out in another non UK country (Spain)
    - No work is carried out in UK.

    UK agent view:

    - I now fall under IR35 legislation and he is required to deduct tax and nics at source via PAYE before paying my UK PSC.
    - Indeed HMRC CEST tool seems to agree with this view.

    My view:

    - Even if CEST appear to say I fall under legislation, I think it cannot be the case due to:
    - worker is not tax resident in UK
    - Client is not resident in UK
    - No work is carried out in UK

    Anyone already come to a conclusion on a similar case ?

  2. #2

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    Quote Originally Posted by Leamcon View Post
    So I haven't seen a specific reliable answer to this conundrum, which I suspect will apply to many contractors, can anyone give an opinion?

    Situation:

    - I am a UK non resident and not ordinarily resident consultant in the Telecoms field.
    - I am working via my own UK PSC.
    - I have a contract to supply services to a client via a UK agency.
    - The end client is a non UK company. (In Romania)
    - The actual work is carried out in another non UK country (Spain)
    - No work is carried out in UK.

    UK agent view:

    - I now fall under IR35 legislation and he is required to deduct tax and nics at source via PAYE before paying my UK PSC.
    - Indeed HMRC CEST tool seems to agree with this view.

    My view:

    - Even if CEST appear to say I fall under legislation, I think it cannot be the case due to:
    - worker is not tax resident in UK
    - Client is not resident in UK
    - No work is carried out in UK

    Anyone already come to a conclusion on a similar case ?
    If the UK agent is paying a UK Ltd, then that might be seen as inside - your company is UK based.

    Why not close down your UK company and set one up where you live, then none of this is an issue (unless there are other factors you're not making us aware of).
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  3. #3

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    I think the agent is correct.

    The IR35 tests measure the work being done, when and how (rather than where) and whether the role, if reduced to a contract, would be that of employment.

    Seems to me that the UK agent > UK end client leg has been evaluated and found to be inside.

    You may be able to make a claim for the tax to be repaid to you if you are non resident.

    Otherwise, as indicated above, close the PSC and contract direct with Romania or Spain and drop the UK leg out of the equation.
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  4. #4

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    Hi,

    Very similar to my situation. I live in the NL, mainly provide the service from the NL but the agent and end client are in the UK and I'm using my UK PSC.

    My salary is processed through a Dutch payroll, Gross reported/accounted in the UK and I have an NT tax code.

    I'm being told that where I'm tax resident and where I provide services do not make me outside scope of IR35 - I've been trying to get clarity on this.

    If IR35 applies then I would need to be processed via an umbrella but presumably this umbrella would have to use an NL payroll themselves for the NL tax and no UK tax assuming I can continue to use the NT tax code.

    So HMRC don't 'benefit' it forces me to process the full congtract value as payroll in which case it's the NL authorities who benefit.

  5. #5

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    Quote Originally Posted by webberg View Post
    I think the agent is correct.

    The IR35 tests measure the work being done, when and how (rather than where) and whether the role, if reduced to a contract, would be that of employment.

    Seems to me that the UK agent > UK end client leg has been evaluated and found to be inside.

    You may be able to make a claim for the tax to be repaid to you if you are non resident.

    Otherwise, as indicated above, close the PSC and contract direct with Romania or Spain and drop the UK leg out of the equation.
    I don't get the HMRC angle in such scenario, there is no UK tax resident client and no UK tax resident worker and no hidden work carried out in the UK, so why would they want to collect tax and have to give it back as is already been accounted for in other jurisdictions and they would have no claim to it. The reason I'm using a UK company is only as up to now has been easier administration when dealing with a UK agent and everything is online and in English with an English accountant. I had suggested to agent to invoice from a foreign PSC but they also view that as somehow suspect. Basically it looks like I will be forced to close UK LTD. and forced to use a different non-UK agent, not sure why that would be in HMRC and global Britain's interest.

  6. #6

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    Quote Originally Posted by nicke1 View Post
    Hi,

    Very similar to my situation. I live in the NL, mainly provide the service from the NL but the agent and end client are in the UK and I'm using my UK PSC.

    My salary is processed through a Dutch payroll, Gross reported/accounted in the UK and I have an NT tax code.

    I'm being told that where I'm tax resident and where I provide services do not make me outside scope of IR35 - I've been trying to get clarity on this.

    If IR35 applies then I would need to be processed via an umbrella but presumably this umbrella would have to use an NL payroll themselves for the NL tax and no UK tax assuming I can continue to use the NT tax code.

    So HMRC don't 'benefit' it forces me to process the full congtract value as payroll in which case it's the NL authorities who benefit.
    Quote Originally Posted by Leamcon View Post
    I don't get the HMRC angle in such scenario, there is no UK tax resident client and no UK tax resident worker and no hidden work carried out in the UK, so why would they want to collect tax and have to give it back as is already been accounted for in other jurisdictions and they would have no claim to it. The reason I'm using a UK company is only as up to now has been easier administration when dealing with a UK agent and everything is online and in English with an English accountant. I had suggested to agent to invoice from a foreign PSC but they also view that as somehow suspect. Basically it looks like I will be forced to close UK LTD. and forced to use a different non-UK agent, not sure why that would be in HMRC and global Britain's interest.
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  7. #7

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    Quote Originally Posted by nicke1 View Post
    Hi,

    Very similar to my situation. I live in the NL, mainly provide the service from the NL but the agent and end client are in the UK and I'm using my UK PSC.

    My salary is processed through a Dutch payroll, Gross reported/accounted in the UK and I have an NT tax code.

    I'm being told that where I'm tax resident and where I provide services do not make me outside scope of IR35 - I've been trying to get clarity on this.

    If IR35 applies then I would need to be processed via an umbrella but presumably this umbrella would have to use an NL payroll themselves for the NL tax and no UK tax assuming I can continue to use the NT tax code.

    So HMRC don't 'benefit' it forces me to process the full congtract value as payroll in which case it's the NL authorities who benefit.
    In your case I can understand HMRC mentality, as the source of the cash is the UK client, so they want to try to stop UK businesses outsourcing what they see as local business to other countries by taking tax at source, not only your tax but UK company NI and apprentice contributions. I view that as a the main reason for the scheme to target UK employers but we non-resident workers are unfortunately caght up in the mess.

  8. #8

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    Quote Originally Posted by Leamcon View Post
    In your case I can understand HMRC mentality, as the source of the cash is the UK client, so they want to try to stop UK businesses outsourcing what they see as local business to other countries by taking tax at source, not only your tax but UK company NI and apprentice contributions. I view that as a the main reason for the scheme to target UK employers but we non-resident workers are unfortunately caght up in the mess.
    so what do you think an anonymous forum can do to help?
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  9. #9

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    Quote Originally Posted by Leamcon View Post
    In your case I can understand HMRC mentality, as the source of the cash is the UK client, so they want to try to stop UK businesses outsourcing what they see as local business to other countries by taking tax at source, not only your tax but UK company NI and apprentice contributions. I view that as a the main reason for the scheme to target UK employers but we non-resident workers are unfortunately caght up in the mess.
    That's an interesting observation! But if I'm allowed to continue to use my NT tax code in the UK they no resulting PAYE/NI will be charged.

    The HMRC don't benefit but it still impacts me hugely as that full contract value has to be processed by the umbrella for Netherlands tax.

    I'm not in the UK, not providing services from the UK, the HMRC don't benefit yet they've stopped me processing the money through my company and I therefore lose all ability to claim expenses or manage my salary levels, etc.

    The UK also lose corporation tax from me!!! So all the HMRC have achieved is an incredible impact to me (admin and financial), they get nothing and the NL authorities benefit.

  10. #10

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    Quote Originally Posted by nicke1 View Post
    That's an interesting observation! But if I'm allowed to continue to use my NT tax code in the UK they no resulting PAYE/NI will be charged.

    The HMRC don't benefit but it still impacts me hugely as that full contract value has to be processed by the umbrella for Netherlands tax.

    I'm not in the UK, not providing services from the UK, the HMRC don't benefit yet they've stopped me processing the money through my company and I therefore lose all ability to claim expenses or manage my salary levels, etc.

    The UK also lose corporation tax from me!!! So all the HMRC have achieved is an incredible impact to me (admin and financial), they get nothing and the NL authorities benefit.
    Agreed the whole thing is badly thought out. Resulting in following actions for me:

    1. Negotiated a new non UK agent with end client in Romania
    2. Opening a new Malta based company
    3. Agreeing with new agent that I can invoice from Malta LTD company.
    4. Keep the same personal tax/national insurance system in Spain as now
    5. Am able to reduce tax burden even more as Malta company tax/dividend payments effectively are reduced to 5% cost

    So bizarrely HMRC looses all previous revenue sources from UK agent and my UK company and forces me to give away less company tax to Malta.

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