IR35 is a set of regulations introduced in April 2020, with an aim to establish the type of relationship between the employee and the employer in situations where the employee is hired on a B2B contract. These laws were put in force as a measure to reduce the number of situations where employees are hired on a B2B contract solely for the purposes of reducing their and the employer’s tax liabilities in the UK.
If after a closer look according to IR35, the contractor’s responsibilities appear not to differ from that of a standard employee, the B2B contract will be taxable as if the contractor was an employee on the company’s payroll, through the PAYE system.
Are you a contractor in the UK? You can check your own employment status using an online guide prepared by HMRC: Check employment status for tax
Who is subject to IR35 regulations?
IR35 applies to:
- employees, who provide their services through an intermediary (e.g. an employment agency or their own LTD company)
- employers who employ workers through intermediaries
- agencies which supply services through intermediaries and not through their own employees
We write a lot about an LTD company as a viable option for digital nomads, both those dealing with clients in the UK and abroad. You might want to take a closer look into IR35 if your only client as a digital nomad is a UK-based company.
Who is not subject to IR35 regulations?
According to the official guidance regarding employment intermediaries, IR35 does not apply to workers who:
- provide their service without anyone (including the intermediary or the client) having the right to supervise, direct, or control how they do the work – see ESM2037 guidance in Employment intermediaries: personal services and supervision, direction or control
- always work from their own home, or on premises not controlled or managed by the client – unless the type of service being provided to the client means the worker has to be at those premises
provides their services as:
- an actor
- singer
- musician or other entertainer
- fashion, photographic or artist’s model
Does IR35 apply to remote work in the UK?
IR35 apply primarily to people whose only source of income is a single B2B contract, with duties carried out at a specific location in a specified time frame and limited control over the scope of their work.
Even though the regulation does specify that a person working from home is not subject to IR35, remote work has become much more prevalent in 2020 and we should expect the UK government will adjust the regulations accordingly, so that they will most likely apply according to the rule of direct control over the scope and details of the work being performed.
Remote work for software developers in the UK and the IR35 rules
Strict rules for direct control over the work being performed are rather rare in the IT industry, and especially rare for developers working remotely. In practice, this type of employment is primarily concerned with the results and not the path for obtaining them. What’s more, remote work for software developers in the UK is not a recent phenomenon, it has been growing in popularity for years before the pandemic hit. Would you like to find a B2B client in the UK as a software developer working remotely? Here are some of the most popular job listing sites for remote programming:
Do you have any additional questions regarding the IR35 rules and how they might apply to your own situation? Perhaps you’re trying to figure out which type of business to establish in order to prepare for becoming a digital nomad? Message us with any questions, we’ll do our best to help!
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