Navigating IR35: Ask Andy Answers
It’s now almost 5 months since the IR35 reforms came into effect, and with lockdown no more, things are beginning to look a lot more like normal for contractors. That being said, in August we still had plenty of questions from contractors on the IR35 reforms, with working for overseas clients once again cropping up frequently. Our Head of Tax, Andy Vessey, is still taking questions on IR35 to help clear the muddy water, so read on for what he answered in August - and to find out how you can ask your own questions.
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.
I am planning to engage with an organisation that falls within the definition of 'small company', so it is my responsibility to determine the IR35 status. My questions are:
1) Are there any points specifically to be considered when contracting with small businesses?
2) Is there any risk in contracting directly with end clients?
3) What document can be used to confirm the size of the business?
You are responsible for self-assessing your IR35 status by considering all the necessary tests of employment status. Regardless of the size of your end client’s organisation, the same principles apply to each of these tests. Contracting directly with the end client may actually be more beneficial as there will only be one contract in place between the parties, so each party can be clear on the contractual and working arrangements. Please refer to HMRC guidance ESM10011B which provides a suggested template for an end client to confirm its size.
My client is issuing a photo ID card for me mentioning ‘Contractor’ on the card and the lanyard. A photo ID is a requirement for Security reasons as the client is in the Aviation Technology sector. Is this acceptable to keep my contract outside of IR35?
Whilst this is not a hugely significant factor in IR35 decision making, nevertheless, it is positive that you have been identified as a contractor, thereby demonstrating that you are not part and parcel of the end client organisation.
I am in process of closing a contract with Germany based FMCG company. They have a branch office in the UK as well.
I have been asking for an Status Determination Statement (SDS) but the German recruitment agency and Client do not have a clue and they are reluctant to involve the UK office into the mix. Do I need to worry from an SDS perspective as at the end of the day, it is the client responsibility and HMRC will be after their UK office without impacting me?
If your end client is a medium/large-sized business, then it is duty-bound to issue you with an SDS by virtue of the fact they have a UK permanent establishment, i.e. a branch. You have done all you can to secure the SDS and you should keep a permanent record of your requests. The German company may be reluctant to involve the UK branch but should HMRC deem your engagement ‘inside’ IR35 then the UK branch will very much become involved and the end client will be held responsible for payment of the resultant PAYE tax and NIC arrears.
I am contracted full time, via my limited company, to a US-based company with no presence of any kind in the UK or the EU. I expect the arrangement to go on for a few years. Is my contract 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.
I am an Irish Citizen, working in Dublin on contracts via my limited company. I am getting a contract In London, for which I have to come to the London office 5 days a week. Can I do 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 a UK resident by virtue of the tests laid down in the Statutory Residence Test. You should follow all the relevant steps and if you are a non-UK resident under these, then IR35 will not take effect as you will not be liable to UK tax on your contractual earnings. If you are deemed a UK resident, then you will have to consider all the necessary tests of employment status to decide whether or not your contract falls inside or outside of 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.
How to Ask Andy…
If reading this blog has left you with questions on your own engagement, you can use our
online form to ask Andy Vessey what he thinks, and he’ll answer your questions here on the blog.
But if reading this has made you realise that you are still responsible for your IR35 status, or if you want to check the status of your engagement to show a client, one option you could use is the award-winning Kingsbridge Status Tool. With the question-set being developed by Andy himself, the tool has been designed to give you a comprehensive and clear review of your working practices. If the result is indeterminate, it will be passed to our IR35 expert to complete a manual review. All for just £50 plus VAT.