One in five contractors ‘actively searching’ for overseas work to avoid IR35

A British IT security consultant who ditched his A-list clients in banking, telecoms and retail to move to Saudi Arabia, just so he could flee the UK’s off-payroll working rules, isn’t alone.

IPSE says that as many as one in five currently UK-based contractors plans to pursue assignments with end-clients who are wholly overseas, beyond the clutches of IR35 reform.

Asked about their 12-month pipeline, 22% of contractors told the Association of Independent Professionals and the Self-Employed (IPSE) that they would only accept work from abroad.

'Knowledge and skills boost to the UK's competitor economies'

A fifth ‘going international’ to avoid inside IR35 take-home pay dents broadly mirrors the 18% who had overseas gigs in the last year, and the 5% who had them when polled.

Of the February-March 2023 probe into 1,447 contractors, IPSE calculated that hundreds of Britons look set to deliver a “knowledge and skills boost to competitor economies”.

“As a result of IR35…and at the expense of UK plc [we’ll see] the pool of flexible talent available to UK [firms reducing], and compounding ongoing labour shortages,” IPSE warns.

'Fifth of contractors actively searching for overseas clients'

Taken with a leap in the stock of PSCs working with ‘small companies,’ the association said contractors were now more likely to be working at off-payroll-exempt clients than in 2021.

Moreover, the findings imply contractors are actually “actively searching” for client-assignments that the rules cannot apply to, says IPSE’s senior policy officer Joshua Toovey.

The findings coincide with one ContractorUK reader requesting “planning advice on leaving the UK” -- as due to his inside IR35 role, “I’m paying about 50% of my gross in taxes.”

'Possible drawbacks'

But wherever contractors relocate to, “there is a need to familiarise yourself with the legal infrastructure,” cautions Hodgens Global, a cross-border tax and accounting advisory.

“Possible drawbacks of leaving the UK [are that] you may have to pay taxes in both the UK and your new country of residence”, the advisory’s Laurence Hodgens told ContractorUK.

Further advising Britons yesterday, Mr Hodgens added: “You may have to deal with visa/immigration issues such as obtaining work or residency permits, or citizenship.

“You may have to adapt to a different culture, language, and legal system in your new country of residence.

“And you may have to face challenges in finding suitable accommodation, health care, education, and employment in your new country of residence.”

'Be prepared to invest in professional advice'

The ContractorUK reader says his plan is to move to Bulgaria to benefit from the county’s flat rate of income tax -- just 10%, to generate a saving of “more than £50,000 overall.”

Tax Advice Network’s Mark Lee responded: “The savings you’re hoping to make are such that you should…be prepared to invest in professional advice on which you can rely with confidence.”

Shown IPSE’s findings and pointed to the 22% of IR35-weary contractors who plan to target foreign engagers with no UK connection, expat adviser Mr Hodgens also sounded cautious.

'No room for error in Dubai'

“Places like Dubai have created an environment where working remotely is possible, but care is needed to address all the formalities required,” he says.

“Now that corporation tax and VAT feature in the UAE law, there is no room for error if you wish to avoid penalties.”

Issuing an alert of his own is IPSE’s Andy Chamberlain.

He says government was told again and again that genuine freelancers “would turn their backs on contracting in the UK” as a result of its IR35 changes.

'Head in the sand'

The association’s policy director, Mr Chamberlain said: “The prospect of more freelancers taking their services abroad is bound to raise alarm bells for firms struggling with skills shortages and competition with rivals overseas.

“But most alarming of all is government’s decision to bury its head in the sand, rather than changing course and acknowledging the damage its own rules are inflicting on British businesses.”