Home » Blog » Does IR35 apply to offshore staff augmentation?
Amid the widespread labour shortages, an increasing number of UK companies are turning to overseas Staff Augmentation to meet the resource demands of their business.
In discussing requirements with new clients, especially larger ones, whether or not IR35 applies to workers engaged through a staff augmentation agreement consistently comes up.
It is such a frequent question; in this article, I will outline two points which seem decisive in demonstrating that the off-payroll working tax rules do not apply to Valenta employees working on assignment to UK clients.
Off-payroll working rules do not apply to non-UK tax residents.
If you look at ESM8305 – Application of the tax rules: residence of worker – HMRC internal manual – GOV.UK (www.gov.uk), you can see that if the worker is non-UK resident, and the location in which the duties of the contract are performed is outside the UK, then the services provided are not subject to the IR35 legislation. The rules on the payments are dependent not on the residence status of the client or the intermediary, but on the residence status of the worker and the location in which the duties of the contract are carried out.
The off-payroll working rules only have the potential to apply where the worker provides their services through their own intermediary.
If you look at “Who the rules apply to” Understanding off-payroll working (IR35) – GOV.UK (www.gov.uk), the qualifying criteria of where the rules might apply is whether the intermediary is the worker’s own.
Conclusion
Valenta employees on staff augmentation assignments to UK clients are not UK tax residents, neither should they be because they perform their duties outside the UK. They cannot pay the employment taxes and national insurance the off-payroll working rules seek to collect.
Valenta employees on staff augmentation assignments for UK (and international) clients are Valenta employees employed in Valenta service delivery centres operated by Valenta companies owned by Jayesh and Chetan Kasim. Valenta employees do not work through their own intermediary.
Disclaimer and Disclosure.
This article does not constitute legal advice; no warranty is offered. The circumstances might be different for other staff augmentation providers. That said, if what has been outlined is inaccurate, you are invited to set the record straight in the comments below. Valenta employees on staff augmentation assignments for UK clients are primarily concentrated in India, with some specialists in the Philippines, Malaysia and Canada. My relationship with Valenta is as the owner of a Valenta franchise in the South West UK. Valenta is a member of the British Franchise Association and conforms to the European Code of Ethics for Franchising.
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