Working without a contract - am I outside IR35?

fronty

I know there are people I can talk to about this but before I open that can of worms I just wanted to describe my situation and ask if anyone thinks I am suitably outside IR35 in case HMRC ever came knocking...

1. I operate a Ltd company that has been in existence for 1 year now, during that time I have invoiced about £150K in professional services fees.
2. I provide consultancy services for a US based company, my invoices are addressed to the company's US office in New Jersey, and I invoice monthly in US dollars, I hedge the currency fluctuations and they pay direct into my UK business bank account (Monzo) which converts to GBP at the prevailing rate.
3. My US customer has no other staff located in the UK, I am their sole representative. They have no UK bank account and have not registered with HMRC - they have registered a UK Ltd company with companies house but it is dormant, all my business is with the US entity, they have customers globally but I provide my services to the US entity. They deemed it simply too much hassle to get a UK account set up and satisfy all the appropriate bureaucracy simply to support one person. 
4. Because my client is located in the US, the B2B place of supply rules mean I am VAT exempt - because my VAT qualifying turnover is below the threshold (effectively £0) I have not registered for VAT and don't file VAT returns
5. I have no signed contract, we agreed my rate verbally. I work from my home office but there is nothing to say I can't work wherever I want (even abroad if I wanted to).
6. I control my own time, and can take time off whenever I like and work whatever hours I deem necessary.
7. My client could terminate me without notice, I could also terminate them without notice.
8. Because there is no contract, there are no substitution clauses, however I do know people who work in my industry I could potentially contract to replace me, subject to their availability.
9. Without a contract I know I am fully aware I am working at risk, but my relationship with my customer is based on mutual trust (having known them for many years prior to my engagement). If I was terminated then I would just get another job (either PAYE or continue contracting).
10. I pay myself a salary of £12570, and draw dividends to top up to something more reasonable
11. To cover off lost benefits, my Ltd company pays into my SIPP (salary sacrifice) and has taken out a group policy with BUPA to provide medical cover for my family
12. I currently don't have any PI insurance (or any insurance for that matter) as I'm not providing services to 3rd parties

When I started this engagement (12 months ago now) my accountant assessed me as being outside IR35 but it's always been in the back of my mind.

Are there any red flags you think I need to address to stay outside IR35?

Thanks for reading.

Grumpy_chap

fronty said:

I know there are people I can talk to about this but before I open that can of worms I just wanted to describe my situation and ask if anyone thinks I am suitably outside IR35 in case HMRC ever came knocking...

1. I operate a Ltd company that has been in existence for 1 year now, during that time I have invoiced about £150K in professional services fees.
2. I provide consultancy services for a US based company, my invoices are addressed to the company's US office in New Jersey, and I invoice monthly in US dollars, I hedge the currency fluctuations and they pay direct into my UK business bank account (Monzo) which converts to GBP at the prevailing rate.
3. My US customer has no other staff located in the UK, I am their sole representative. They have no UK bank account and have not registered with HMRC - they have registered a UK Ltd company with companies house but it is dormant, all my business is with the US entity, they have customers globally but I provide my services to the US entity. They deemed it simply too much hassle to get a UK account set up and satisfy all the appropriate bureaucracy simply to support one person. 
4. Because my client is located in the US, the B2B place of supply rules mean I am VAT exempt - because my VAT qualifying turnover is below the threshold (effectively £0) I have not registered for VAT and don't file VAT returns
5. I have no signed contract, we agreed my rate verbally. I work from my home office but there is nothing to say I can't work wherever I want (even abroad if I wanted to).
6. I control my own time, and can take time off whenever I like and work whatever hours I deem necessary.
7. My client could terminate me without notice, I could also terminate them without notice.
8. Because there is no contract, there are no substitution clauses, however I do know people who work in my industry I could potentially contract to replace me, subject to their availability.
9. Without a contract I know I am fully aware I am working at risk, but my relationship with my customer is based on mutual trust (having known them for many years prior to my engagement). If I was terminated then I would just get another job (either PAYE or continue contracting).
10. I pay myself a salary of £12570, and draw dividends to top up to something more reasonable
11. To cover off lost benefits, my Ltd company pays into my SIPP (salary sacrifice) and has taken out a group policy with BUPA to provide medical cover for my family
12. I currently don't have any PI insurance (or any insurance for that matter) as I'm not providing services to 3rd parties

When I started this engagement (12 months ago now) my accountant assessed me as being outside IR35 but it's always been in the back of my mind.

Are there any red flags you think I need to address to stay outside IR35?

Thanks for reading.

IR35 does not apply if the end Client is wholly overseas:
https://www.gov.uk/guidance/off-payroll-working-for-clients

You may have to register for the equivalent of VAT in USA.

It would be wise for your Ltd Co. to have in place basic insurance (professional indemnity, employer's liability, public and products liability) which includes USA geographical location / contracts.

DullGreyGuy

Grumpy_chap said:

fronty said:

I know there are people I can talk to about this but before I open that can of worms I just wanted to describe my situation and ask if anyone thinks I am suitably outside IR35 in case HMRC ever came knocking...

1. I operate a Ltd company that has been in existence for 1 year now, during that time I have invoiced about £150K in professional services fees.
2. I provide consultancy services for a US based company, my invoices are addressed to the company's US office in New Jersey, and I invoice monthly in US dollars, I hedge the currency fluctuations and they pay direct into my UK business bank account (Monzo) which converts to GBP at the prevailing rate.
3. My US customer has no other staff located in the UK, I am their sole representative. They have no UK bank account and have not registered with HMRC - they have registered a UK Ltd company with companies house but it is dormant, all my business is with the US entity, they have customers globally but I provide my services to the US entity. They deemed it simply too much hassle to get a UK account set up and satisfy all the appropriate bureaucracy simply to support one person. 
4. Because my client is located in the US, the B2B place of supply rules mean I am VAT exempt - because my VAT qualifying turnover is below the threshold (effectively £0) I have not registered for VAT and don't file VAT returns
5. I have no signed contract, we agreed my rate verbally. I work from my home office but there is nothing to say I can't work wherever I want (even abroad if I wanted to).
6. I control my own time, and can take time off whenever I like and work whatever hours I deem necessary.
7. My client could terminate me without notice, I could also terminate them without notice.
8. Because there is no contract, there are no substitution clauses, however I do know people who work in my industry I could potentially contract to replace me, subject to their availability.
9. Without a contract I know I am fully aware I am working at risk, but my relationship with my customer is based on mutual trust (having known them for many years prior to my engagement). If I was terminated then I would just get another job (either PAYE or continue contracting).
10. I pay myself a salary of £12570, and draw dividends to top up to something more reasonable
11. To cover off lost benefits, my Ltd company pays into my SIPP (salary sacrifice) and has taken out a group policy with BUPA to provide medical cover for my family
12. I currently don't have any PI insurance (or any insurance for that matter) as I'm not providing services to 3rd parties

When I started this engagement (12 months ago now) my accountant assessed me as being outside IR35 but it's always been in the back of my mind.

Are there any red flags you think I need to address to stay outside IR35?

Thanks for reading.

IR35 does not apply if the end Client is wholly overseas:
https://www.gov.uk/guidance/off-payroll-working-for-clients

You may have to register for the equivalent of VAT in USA.

It would be wise for your Ltd Co. to have in place basic insurance (professional indemnity, employer's liability, public and products liability) which includes USA geographical location / contracts.

You are misreading it, IR35 does apply still however where the end client is overseas its the UK based entity (ie the OP's own LTD) that makes the determination and suffers the consequences if HMRC successfully challenges the determination. 

fronty said:

I know there are people I can talk to about this but before I open that can of worms I just wanted to describe my situation and ask if anyone thinks I am suitably outside IR35 in case HMRC ever came knocking...

1. I operate a Ltd company that has been in existence for 1 year now, during that time I have invoiced about £150K in professional services fees.
2. I provide consultancy services for a US based company, my invoices are addressed to the company's US office in New Jersey, and I invoice monthly in US dollars, I hedge the currency fluctuations and they pay direct into my UK business bank account (Monzo) which converts to GBP at the prevailing rate.
3. My US customer has no other staff located in the UK, I am their sole representative. They have no UK bank account and have not registered with HMRC - they have registered a UK Ltd company with companies house but it is dormant, all my business is with the US entity, they have customers globally but I provide my services to the US entity. They deemed it simply too much hassle to get a UK account set up and satisfy all the appropriate bureaucracy simply to support one person. 
4. Because my client is located in the US, the B2B place of supply rules mean I am VAT exempt - because my VAT qualifying turnover is below the threshold (effectively £0) I have not registered for VAT and don't file VAT returns
5. I have no signed contract, we agreed my rate verbally. I work from my home office but there is nothing to say I can't work wherever I want (even abroad if I wanted to).
6. I control my own time, and can take time off whenever I like and work whatever hours I deem necessary.
7. My client could terminate me without notice, I could also terminate them without notice.
8. Because there is no contract, there are no substitution clauses, however I do know people who work in my industry I could potentially contract to replace me, subject to their availability.
9. Without a contract I know I am fully aware I am working at risk, but my relationship with my customer is based on mutual trust (having known them for many years prior to my engagement). If I was terminated then I would just get another job (either PAYE or continue contracting).
10. I pay myself a salary of £12570, and draw dividends to top up to something more reasonable
11. To cover off lost benefits, my Ltd company pays into my SIPP (salary sacrifice) and has taken out a group policy with BUPA to provide medical cover for my family
12. I currently don't have any PI insurance (or any insurance for that matter) as I'm not providing services to 3rd parties

When I started this engagement (12 months ago now) my accountant assessed me as being outside IR35 but it's always been in the back of my mind.

Are there any red flags you think I need to address to stay outside IR35?

Thanks for reading.

Not sure why you are paying for BUPA via the company? Its likely to be more expensive and not tax efficient assuming you are remembering to declare the BIK 

How are you not providing services? Your client has paid you £150k and you've not done any work for them? What are the monies for if not services?

The main red flag is the lack of a contract, unless you can evidence that you have provided a substitue in the past the only evidence is the contract that states you can. Its worth looking at the questions in any IR35 determination tool which will indicate the sort of things that HMRC are considering and therefore you need either evidence of that your business practice matches it or a contract stating that it will if its not something thats actually happened.