Q. A friend of mine is a UK tax resident. She used to be a regular employee of a UK company. Now she moved to Poland, but will still perform some work for her previous employer from there. She will have to come to the UK for at least 3 working days a month though. Her UK company decided that it is too complicated from tax perspective to keep her on payroll, so she will become a contractor. How would HMRC treat this kind of arrangement in the case that she is (a) a sole-trader registered in Poland (b) an limited company registered in Poland? Would she be covered by IR35? For which income would she have to pay taxes in the UK?
A. Provided your friend remains non-resident for UK tax purposes then, broadly speaking, provided they/their company does not have a fixed place of business in the UK from which their business is run or an independent UK agent acting on their behalf, there will be no UK tax consequences. They will be deemed to be trading with the UK rather than in the UK. This rule also applies to IR35 although the intermediaries legislation does not apply to sole traders.