Contract with foreign company - any IR35 risk?
Discussion
I’m currently an employee of a U.K. based company. It is a subsidiary of a non-U.K. company. There is no U.K. office, my role is global and I work from home when not travelling.
The owners plan to close the U.K. company and I will then be paid by the foreign company. There will be no U.K. based employer for PAYE purposes, etc.
So I plan to set up a limited company myself which will invoice the non-U.K. company a regular monthly amount and I will be an employee of ‘my’ company.
I have limited understanding of the issues around IR35 etc, but I assume this wouldn’t be an issue here given that although I’m providing services to a single company it’s not in the U.K.?
Anyone have any knowledge, experience or wisdom to offer?
(I will obviously be taking insured, professional advice too.)
The owners plan to close the U.K. company and I will then be paid by the foreign company. There will be no U.K. based employer for PAYE purposes, etc.
So I plan to set up a limited company myself which will invoice the non-U.K. company a regular monthly amount and I will be an employee of ‘my’ company.
I have limited understanding of the issues around IR35 etc, but I assume this wouldn’t be an issue here given that although I’m providing services to a single company it’s not in the U.K.?
Anyone have any knowledge, experience or wisdom to offer?
(I will obviously be taking insured, professional advice too.)
What is it you do? The role will determine whether you are in / outside of IR35.
There is a public sector calculator on HMRC's website that will give you an indication on your IR35 status. Although it only applies to the public sector right now, it will apply to the private sector from April next year. As I say this is an indicator, not a fact and is still in Beta.
https://www.gov.uk/guidance/check-employment-statu...
From April next year, it will be down to your client to decide your IR35 status and they could be liable for the tax if they get this wrong. How this works with a foreign business I don't know, so again getting the right advice is critical.
There is a public sector calculator on HMRC's website that will give you an indication on your IR35 status. Although it only applies to the public sector right now, it will apply to the private sector from April next year. As I say this is an indicator, not a fact and is still in Beta.
https://www.gov.uk/guidance/check-employment-statu...
From April next year, it will be down to your client to decide your IR35 status and they could be liable for the tax if they get this wrong. How this works with a foreign business I don't know, so again getting the right advice is critical.
foliedouce said:
What is it you do? The role will determine whether you are in / outside of IR35.
There is a public sector calculator on HMRC's website that will give you an indication on your IR35 status. Although it only applies to the public sector right now, it will apply to the private sector from April next year. As I say this is an indicator, not a fact and is still in Beta.
https://www.gov.uk/guidance/check-employment-statu...
From April next year, it will be down to your client to decide your IR35 status and they could be liable for the tax if they get this wrong. How this works with a foreign business I don't know, so again getting the right advice is critical.
We’re a consulting and software company. I work on the consulting side.There is a public sector calculator on HMRC's website that will give you an indication on your IR35 status. Although it only applies to the public sector right now, it will apply to the private sector from April next year. As I say this is an indicator, not a fact and is still in Beta.
https://www.gov.uk/guidance/check-employment-statu...
From April next year, it will be down to your client to decide your IR35 status and they could be liable for the tax if they get this wrong. How this works with a foreign business I don't know, so again getting the right advice is critical.
It’s the ‘foreign company’ bit that’s key, as far as I can make out. My understanding is that if you’re only doing work for one company, which is where the IR 35 bit seems to kick in, but that company is not U.K. based then you can’t get caught up in IR35 because there’s no U.K. company for HMRC to point at.
Unless I’m completely wrong and HMRC do consider completely non-U.K. companies as if they were U.K. based?
Having said that though, surely it would make no difference anyway because without a U.K. company existing, there’s no HMRC company UTR so they couldn’t say ‘you’re an employee and must go onto PAYE’ as there’s no employer to administer that.
Edited by PorkInsider on Saturday 27th April 12:05
The foreign company bit adds complexity as far as your contract is concerned (UK or Foreign law) and from April next year who decides your IR35 status. It ‘may’ work in your favour as potentially you decide what your IR35 status is. I don’t though as fact.
Irrespective of that, you have a UK Ltd company and HMRC will look at that in regards to IR35, so to an extent the fact that a foreign company is paying you is a red herring.
If your contract and actual work (HMRC will look through the contract), shows deemed employment then you’re inside IR35.
As you’re consulting then it sounds that you’ll be an Interim moving forward. My suggestion is to link your pay to milestones / fixed price (at least in part) rather than day rate or get multiple clients. That set up demonstrates that you are not an employee.
I’m sure an accountant can advise you better than me though,
Irrespective of that, you have a UK Ltd company and HMRC will look at that in regards to IR35, so to an extent the fact that a foreign company is paying you is a red herring.
If your contract and actual work (HMRC will look through the contract), shows deemed employment then you’re inside IR35.
As you’re consulting then it sounds that you’ll be an Interim moving forward. My suggestion is to link your pay to milestones / fixed price (at least in part) rather than day rate or get multiple clients. That set up demonstrates that you are not an employee.
I’m sure an accountant can advise you better than me though,
JPJPJP said:
Tread carefully. That the ltd which employs you is only going to derive income from only one client is a red flag.
That in and of itself is not a red flag, IR35 legislation says nothing about having just one client.What would have alarm bells ringing for me is being caught under direction and control, after all you are directly transitioning from permanent employee status under the same client.
Many thanks all.
Regarding the possibility of becoming an employee of another part of the company: that’s not completely out of the question as we may possibly end up with another company in Europe which I could be employed by. Having said that I could also, in theory at least, become an employee of the company which is currently the holding company for the U.K. company if that helps.
I’m beginning to understand the possibility of being inside IR35, despite the foreign employer, too. So thanks for the help there as well.
Looks like it may not be straight forward even with the professional advice which I’ll be seeking before proceeding further.
Regarding the possibility of becoming an employee of another part of the company: that’s not completely out of the question as we may possibly end up with another company in Europe which I could be employed by. Having said that I could also, in theory at least, become an employee of the company which is currently the holding company for the U.K. company if that helps.
I’m beginning to understand the possibility of being inside IR35, despite the foreign employer, too. So thanks for the help there as well.
Looks like it may not be straight forward even with the professional advice which I’ll be seeking before proceeding further.
One thing to remember is that being inside ir35 isn't such a terrible thing - its just like being a normal employee of a company.
The reason ir35 was brought in was because so many people were taking the piss in the way they were manipulating rules to reduce their tax. All those people paying themselves unrealistically tiny salaries while taking large monthly dividends, buying personal items through the company, etc
You are not actually intending to be in business on your own account, you are looking for a legal structure that lets you remain an employee of an organisation that no longer has a uk arm.
It may well be worth you getting advice on how things would work if you were to become a directly employed worker for the eu business. That could well have significant advantages for you especially if the company treats employees well. I guess you'd need to fill in a few forms to cover tax/ni in the country of employment and here and probably have the overhead of a tax return every year.
The reason ir35 was brought in was because so many people were taking the piss in the way they were manipulating rules to reduce their tax. All those people paying themselves unrealistically tiny salaries while taking large monthly dividends, buying personal items through the company, etc
You are not actually intending to be in business on your own account, you are looking for a legal structure that lets you remain an employee of an organisation that no longer has a uk arm.
It may well be worth you getting advice on how things would work if you were to become a directly employed worker for the eu business. That could well have significant advantages for you especially if the company treats employees well. I guess you'd need to fill in a few forms to cover tax/ni in the country of employment and here and probably have the overhead of a tax return every year.
The general rule is that any entity that makes use of UK based labour has to apply UK tax and NI regulations to the payments that it makes to a UK based individual. It does not matter if the entity is based outside the UK.
If they do not have a UK base of operation or a UK office for administering their affairs within the UK, the normal procedure is for them to appoint a UK agent (usually an accountant or accountancy firm or a payroll bureau) to ensure their tax and other legal obligations within the UK are properly conducted.
If they do not have a UK base of operation or a UK office for administering their affairs within the UK, the normal procedure is for them to appoint a UK agent (usually an accountant or accountancy firm or a payroll bureau) to ensure their tax and other legal obligations within the UK are properly conducted.
TooLateForAName said:
You are not actually intending to be in business on your own account, you are looking for a legal structure that lets you remain an employee of an organisation that no longer has a uk arm.
It may well be worth you getting advice on how things would work if you were to become a directly employed worker for the eu business. That could well have significant advantages for you especially if the company treats employees well. I guess you'd need to fill in a few forms to cover tax/ni in the country of employment and here and probably have the overhead of a tax return every year.
You’re right. I would much prefer to remain an employee of the U.K. company if that were an option. I’m not looking at this as a way to reduce tax liabilities.It may well be worth you getting advice on how things would work if you were to become a directly employed worker for the eu business. That could well have significant advantages for you especially if the company treats employees well. I guess you'd need to fill in a few forms to cover tax/ni in the country of employment and here and probably have the overhead of a tax return every year.
Of course if, through this, there was an opportunity to reduce deductions I’d take it but this is more about finding a simple way forwards with as little expense and headache as possible.
Point of note: the company paying me (or my company, depending how I end up proceeding) will now be UAE based rather than EU.
Eric Mc said:
The general rule is that any entity that makes use of UK based labour has to apply UK tax and NI regulations to the payments that it makes to a UK based individual. It does not matter if the entity is based outside the UK.
If they do not have a UK base of operation or a UK office for administering their affairs within the UK, the normal procedure is for them to appoint a UK agent (usually an accountant or accountancy firm or a payroll bureau) to ensure their tax and other legal obligations within the UK are properly conducted.
Thanks Eric. I will discuss this with the company. It sounds a lot simpler and puts the ball back in my employer’s court.If they do not have a UK base of operation or a UK office for administering their affairs within the UK, the normal procedure is for them to appoint a UK agent (usually an accountant or accountancy firm or a payroll bureau) to ensure their tax and other legal obligations within the UK are properly conducted.
By the way, for reference, it’s a small (but growing) company I work for. Roughly 30 employees now.
TooLateForAName said:
One thing to remember is that being inside ir35 isn't such a terrible thing - its just like being a normal employee of a company.
This. I wouldn't get your knickers in a twist about it at all. Just run everything through PAYE and IR35 largely goes away.I would however suggest that you do need to be concerned about a whole load of other stuff - how expenses are going to work, what the relevant VAT thresholds are, your statutory reporting requirements, pension contributions, vacation, employers NI, entitlement to other employee benefits (share schemes, commission/bonuses, discretionary awards etc.etc. etc.). You should make sure that paying for a good accountant plus an employment lawyer to handle all of this for you is part of the package that you demand from your current employer.
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