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IR35 implications and residence

IR35 could affect anyone who provides their services through an intermediary, which isn’t a management service company, including foreign nationals.

When the Limited company (or partnership) you provide services through is incorporated or resident outside of the UK, IR35 rules still apply.  When working and living within the UK and services are provided for a client in the UK, the intermediary is treated as having a place of business within the UK, irrespective of whether or not it actually does have one.

If an offshore personal service company fails to deduct and account for PAYE & NIC under IR35, a liability to pay tax and NIC can be shifted to the worker, onshore agencies or end-clients.

If you are non-UK resident and IR35 does apply, the PAYE and NIC situation will depend on the tax residence status of the worker, the client and the location where duties of the contract were carried out.

Double tax relief may apply if the work is carries out overseas.  There may be a case that the foreign tax authority may withhold tax for payments made to the company.  If this applies, any of these foreign tax credits are normally given against the company’s tax liability.

There may be a case however that if the UK tax liability on the company is insufficient to give any such credit, but the worker does, the balance may be allowed against the tax liability on the IR35 deemed employment payment.

Any reliefs however can only be granted and given where there is a direct link between the work in the overseas country and the deemed employment payment, however relief cannot be given against any NIC liability.

Should you wish to understand more about IR35 and how it may affect you, contact Craig Barlow on 01942 403306.