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Anyone know if this is legal in the UK? Hypothetical, of course... 😉
[b][u]Scenario:[/b][/u]
A UK PLC, which operates around Europe. A lot of staff are now employed as contractors through an Irish agency, working out of the UK. Said staff are self-employed through an Irish umbrella company, paying Irish NI and tax.
UK tax return declares no tax owed in UK under dual tax agreement. Obviously, no IR35 to deal with in this situation. Contract runs for 2-3 years.
Staff receive no paid holiday (unpaid leave randomly assigned two weeks in advance) or sick pay, but are expected to wear company uniform, have company ID cards, and company email addresses; and receive a few benefits allowed to permanent employees.
Seems to be a very grey area about judging whether self-employed or not - no guidance on the direct.gov website covering this particular situation.
What's your take on it? Worth stashing away a bit of extra cash in case the Inland Revenue takes a dim view on this? Should say that in this particular scenario there might be as many as a thousand people involved.
*report sent to HMRC*
🙂
As I said, hypothetical. 😉
Presumably the company have had it checked over by accountants from their point of view, but considering my personal situation before getting involved with it.
Potentially a lucrative deal, but means going back to the world of contracting.
A grey area, indeed!
Unfortunately, UK tax law is not "black and white", and it's open to the Revenue to change their collective mind on how to interpret the law . . . and then apply the new interpretation retrospectively
Its a tough one, but the employee/contractor one kind of simple. If you can control your own working hours, holiday, discipline and have the right to delegate the work to another etc etc then you are a contractor - if not then you are an employee (the control test and obligation test is kind of king here). I would say though that the uniform issue has been used in advance to direct the wearer as an employee in certain circumstances - it will vary on how the tribunal sees it.
The tax matter will be reviewed by HMRC on where you live not where you set up your tax shelter. If you are a uk citizen and reside for more than 90 days in the applicable tax year (I think its 90 day but check) then you are subject to UK taxation. As far as I know the Eire loophole is for Eire residents/passport holders.
I would suggest getting strong independent tax and legal advice before filing any return to HMRC.
if your an agency contractor paying ni and tax you must be cards in and therefore an employee of the agency as it is based ' abroad' you are in theory paying the tax and ni applicable to your employer ( same as when i worked in hungary for a uk company and paid uk tax and ni and nowt to les Magyars..)
Didn't Ryanair get their hands slapped by the French equivalent of HMRC for doing this, and as a result pulled out of some random french provincial airport?
So no NI contributions for 2-3 years and what happens when they cut the contract early and the agency winds up leaving you in limbo.
From HMRC point of view in the current climate they would look at your residency and if you have tried to evade the taxes of that country.
Safe as houses, a 'friend' used a firm in Eire for years when he was contracting. Few stumbling blocks when you finally come back on-line but well worth it.
I would be careful, HMRC like to open your mouth and shit down your throat if you get too clever, this type of thing isn't new to them.
I am no lawyer, all i can do is quote some stuff i am revising for an OU exam.
three questions,
Control test, does your "employer" control what, when and how you work?
Integration test are your duties central to the actions of the business
Economic reality test, where is the financial risk, regular hours, mutuality of obligation,
Mind you not paying NI may have its own concequences, ie no unemployment benefit when you get dumped, Pension contribution issues. etc
As an aside infront of me is an example Ready mixed concrete (south east) Ltd v minister of pensions and national insurance [1968] 2 QB 497.
driver bought on HP vehicle branded in company colours had to wear uniform and various other brandings. But was accepted as a subcontractor and not an employee.
More importantly, do you really want to work for O'Leary in the first place?
If you work through an umbrella, you're not self-employed, you're an employee of the umbrella company.
If you work through an umbrella, you're not self-employed, you're an employee of the umbrella company.
yes but a company that's tax exempt in the UK
Can't be faffed reading all that but I was under the impression that the only point in (IT) contracting was to earn large sums of money and then try and fiddle the system to try and keep as much as possible 😉
Thats what lures me to it anyway... £500/600 a day, even taking off the tax sounds pretty good!
My point is that 'self-employed' doesn't come in to it at all. In my (probably highly flawed) opinion you're the employee of an EU company (the umbrella), yet resident in the UK, so fall under whatever rules regarding tax and NI collection are applicable in this case. If you live here permanently, then HMRC will probably want you to pay tax here. Easiest thing is to phone your local tax office for advice.
I will also point out that the only beneficiary in this scheme is the shady 'UK PLC'. They win by washing their hands of any responsibility for their employees (NI, Tax, Pension, Insurances etc.), and when HMRC comes calling, the first people that will be hung out to dry are the staff. The taxman will come after you, not the employer or the umbrella.
As above, if you live in the UK you pay tax in the UK on your earnings.
The fact that it's beneficial to your employer to be registered in a country with low corporation tax is irrelevant to your tax liability.