IR35 is commonly used to describe the UK Tax regulation which was introduced on 6th of April 2000 and is the British intermediary legislation . Its gets its name from a press release issued by HMRC on the 23rd of September 1999 which was numbered “ IR35’’ and you need to be aware of it , if you deal with employment agencies in the United Kingdom.
IR35 introduced the concept of “ deemed employment” for the independent contractor, their employment agency and the end client.
The type of contract, which the contractor agrees to enter will often determine the type of structure that they can use. Even before IR35 was introduced in the UK , the relationships between the agency worker and the employment agency and the end client still followed basic concepts .
- An employee –employer “contract of service ‘
- A contractor –agency contract is a “contract for services ‘
In most cases a contract issued by an employment agency to a limited company is a “contract for services”.
Contractors entering in to contractors using a UK based limited company , can find themselves within the scope of IR35 even if the location and client where their duties are performed outside the United kingdom.
Another common misconception is that the (183 day rule) allows a contractor to work overseas for six months and still use their existing UK structure.
Countries vary greatly on what they allow most European countries will not interpret matters it in the same way as the United Kingdom. For a UK contractor working overseas the requirements can be very different.
As en example, In the Netherlands it is perfectly legal for the end client as the “economic employer” ,to withhold a percentage of the invoiced amount from the agency if they are not satisfied that Taxes are being paid and this is a vert important in consideration to be taken into account before you accept a Dutch contract.
In order to contract in Holland you need to use a compliant Dutch solution from day one. In this instance Chesterfield becomes your employer and takes care of issues like Social security , Income Tax Insurance and more.
These are just some of the consideration to be taken into account before you take up a an overseas contract.