Does IR35 reform apply if I’m based abroad?

Q. I live permanently in Romania. I operate through my own limited company, which is registered in Romania and subject to Romanian taxes. I’m not a tax resident in the UK and haven’t been for well over a decade. However, I do deliver work internationally and as a result of Brexit, I’m being forced to consider UK-based contracts, reluctantly. Will I be impacted by IR35 reform?

A. IR35 is UK tax legislation, meaning that limited companies that are not registered to these shores are not impacted by the rules. Working off the basis that you continue to reside in Romania and work through your Romanian-registered company for a UK-based client, IR35 reform will not apply to you.

By this, we mean that should a UK-based medium or large private sector company or a public sector organisation engage you from 6th April onwards, they will not decide your tax status, nor will HMRC enquire into your tax activity. 

This is because the UK tax office has no real power to influence overseas companies, such as ones based in Romania. Assuming that your company stays registered in Romania and you remain a Romanian tax-payer, you will need to abide by the laws set there. 

However, if Brexit was to mean you moved back to the UK and became a UK taxpayer and you then form and operate through a UK-registered Personal Service Company, then you will need to consider IR35 – as any other contractor must. If this was to happen and you continued to deliver contracts overseas, you might be interested in reading this article.

In conclusion, the general rule of thumb is that you should act in accordance with the tax laws of the country your company is registered in, even if your client isn’t based there. 

This answer was provided by IR35 specialist, Qdos Contractor.