Five months on from the introduction of the new IR35 legislation and we’re still getting questions from contractors for Kingsbridge’s Head of Tax, Andy Vessey, asking him to apply his 20-plus years of IR35 knowledge to their situations. This month we have several questions about the ins and outs of working for clients, when you or they are based outside of the UK.
This article is for information purposes only and should not be seen as financial advice. You should always consult with your accountant for any tax advice.
If a client refuses to accept that you are outside IR35 when you can prove it beyond doubt, what can you do other than not work for them?
If the status disagreement process has been exhausted, then when it comes to completing your 2022 Self-Assessment Tax Return you can treat the earnings from your end client as being ‘outside’ IR35 and apply for a refund of the PAYE tax suffered. At the same time you will need to provide an explanation in the white space information box as to why you have done this and the reasons you believe you should not have been placed within the off-payroll rules. Separately, you will need to write to HMRC after 5th April 2022 to apply for a refund of the employee’s NIC suffered, again explaining why you believe you have overpaid NIC.
If you want to take more immediate action then you could contact HMRC via your Personal Tax Account or the helpline for individuals & employees to tell them why your tax code is wrong.
Both these actions will trigger a HMRC enquiry into your claim and this is where you will need compelling evidence if HMRC are to agree with your conclusion as, in general, HMRC will place greater emphasis on the end client evidence.
I am an Irish citizen working in Dublin on contracts via my limited company. I am embarking on a contract in London, for which I need to come to the client’s London office five days a week. Can I carry out this contract via my Irish limited company? Will I be inside IR35 or not?
You will only need to consider the IR35 legislation if you are UK resident by virtue of the tests laid down in the Statutory Residence Test. You should follow all of the relevant steps and, if you are non-UK resident by virtue of these, then IR35 will not take effect as you will not be liable to pay UK tax on your contractual earnings. If you are deemed a UK resident, then you will have to consider all of the necessary tests of employment status to decide whether or not your contract falls inside or outside IR35 unless your end client is within the scope of the off-payroll rules, in which case they will be responsible for determining your IR35 status.
I’m living in the UK but providing consulting services for a company based in the USA as they don’t have the capability to carry out the work needed due to time difference. The company they want me to carry out work for is based in the UK but the consultancy company in the USA will be paying me for the work my limited company does for this UK end client. My contract will be directly with the USA company (who have no presence in the UK). Will this be outside IR35?
As the off-payroll rules do not need to be considered by your end client, you remain responsible for assessing your IR35 status by considering all the necessary tests of employment by reference to the contractual and actual working arrangements.
My limited company, which is registered in Scotland, has been offered a contract with an Irish-based client. This client has a sister company based in England which is the UK branch. I will be dealing directly with the Irish company, spending the majority (99%) of my working hours in Ireland, with potential visits to vendor sites in the UK. They have informed me that the contract is OUTSIDE IR35. In your opinion should IR35 be considered in this contract?
Your end client has a responsibility to consider the off-payroll rules and has acknowledged this by determining your employment status as being ‘outside’ IR35. If they get this wrong, then it is they who will be responsible for any PAYE tax & NIC arrears. You do have a right to object to that decision but why would you? It is not your duty to consider whether or not they have taken reasonable care in reaching their decision. The end client should have provided you with a copy of the Status Determination Status (SDS) which should give the reasons for reaching their conclusion. From your message, I am unsure what these reasons are, but if you are having to meet all your business travelling expenses and these are significant and not reimbursed by the end client, then they may have considered that you are exposed to a significant financial risk?
How to Ask Andy…
If you have your own question to put to Andy, you can do so by completing our simple online form.
In the meantime, if you need a more concrete idea of whether you fall inside or outside IR35 for an engagement, you should take a look at the Kingsbridge IR35 Status Tool. Developed by Andy himself, the Status Tool costs just £50 plus VAT and can give you an accurate inside or outside IR35 result. And, should your status be borderline, your case will be passed to one of our in-house IR35 specialists for manual review, giving you confidence and peace of mind.
