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International markets are a growing and lucrative option for contractors (sometimes offering the opportunity to work overseas) as the world becomes a more connected place. However, the off-payroll legislation is not applicable to clients and fee-payers with no presence in the UK. Therefore, what constitutes a client being classed as ‘overseas’?
Firstly, they must be ‘wholly overseas’. And for a client to be considered ‘wholly overseas’ they must not be resident in the UK i.e. incorporated in the UK or have a permanent UK establishment i.e. an office or branch in the UK. If the client does, then they must still assess IR35.
Secondly, this means that whenever the client is deemed to be based wholly overseas the off-payroll legislation does not apply and the intermediaries legislations does. This means that the client does not need to determine IR35 status of the contractor, it is for contractor to assess and decide.
Some contractors provide their services overseas, whilst others do so within the UK but via a non-UK limited company. In these instances, IR35 status depends on the tax residency of the contractor performing the services.
If a contractor is a UK resident for tax purposes, then consideration needs to be given to the IR35 supply chain to determine if the contractor or the client are required to make an IR35 status determination. If the contractor is a non-UK resident providing services in the UK, then depending on the specific circumstances there could be a tax liability.
We always recommend that contractors seek professional tax advice when confirming their IR35 status when working or providing services outside of the UK.
