Plan contractor hiring in the United Kingdom

Start with the legal supplier. The off-payroll rules enter only when the worker supplies services through an intermediary and would have been an employee if engaged directly. A sole trader billing personally has no intermediary for this purpose. If the worker uses their own company, test the client boundary next. A client with neither UK residence nor a UK permanent establishment immediately before the tax year is wholly overseas, so Chapter 10 falls away and the worker's intermediary considers Chapter 8. An office, branch, factory or agent with habitual authority can change that result. The contractor's UK company alone is not the buyer's permanent establishment.

Sources: HMRC, understanding off-payroll working, HMRC Employment Status Manual ESM10006, wholly overseas clients

If the line is crossed

For a wholly overseas client, a positive Chapter 8 conclusion does not turn the foreign buyer into the Chapter 10 fee payer. The worker's intermediary calculates the deemed employment payment and accounts for the income tax and employer and employee Class 1 National Insurance due on a positive amount. It tests each engagement separately and revisits the result when terms or practice change. Direct employment follows a different payer boundary: HMRC links compulsory PAYE operation by a foreign employer to a UK tax presence, although an employer without that presence can operate PAYE voluntarily and a UK host can acquire duties in an employee-assignment case.

Sources: HMRC Employment Status Manual ESM10006, wholly overseas clients, HMRC, off-payroll working for intermediaries serving small clients, HMRC PAYE Manual PAYE81610, employer presence in the UK, HMRC, globally mobile employees and PAYE

CIS payment and deduction statement

This document belongs only to qualifying UK construction. A construction business paying subcontractors is a CIS contractor; a business outside construction enters after spending more than £3 million on construction in the 12 months from its first payment. The same scheme reaches an overseas business doing construction work in the UK. After HMRC verification, the deduction is 20% for a registered subcontractor, 30% for an unregistered one and 0% where gross payment status is confirmed. Qualifying VAT and direct material or plant amounts come out of the base. Keep ordinary remote professional services outside this branch.

Issued by: The in-scope buyer that makes the CIS deduction, to the subcontractor

Timing: Within 14 days after the end of the tax month in which the deduction was made

Sources: HMRC, Construction Industry Scheme, HMRC, CIS for businesses based outside the UK, HMRC, make CIS deductions and pay subcontractors

VAT invoice

A VAT invoice becomes the tax evidence for a VAT-registered customer reclaiming input tax when a VAT-registered supplier makes a standard-rated or reduced-rated supply. It is not the automatic document for every cross-border service: a general-rule service supplied to a foreign business is usually outside UK VAT, and customers who are not VAT registered cannot use this reclaim evidence. When a special place rule or another fact makes UK VAT due, match the invoice to the supplier's registration and keep the full VAT particulars with the booked expense.

Issued by: The VAT-registered supplier to the VAT-registered business customer

Timing: Normally within 30 days of the tax point when a full UK VAT invoice is required

Sources: HMRC, VAT guide (VAT Notice 700)

Under the general B2B rule, a service is supplied where the business customer belongs. A UK contractor billing a foreign business therefore treats the service as outside UK VAT when no specific rule changes the place. Land, events, transport, use-and-enjoyment and other listed branches require a separate check. The contractor should retain evidence that the buyer is in business and belongs outside the UK, using a VAT number, fiscal certificate or other commercial record. Outside-scope supplies are disregarded when compulsory-registration turnover is calculated, while the contractor's UK taxable supplies continue to count.

Sources: HMRC, place of supply of services, VAT Notice 741A, HMRC VAT Registration Manual VATREG02550, outside-scope supplies

What an invoice has to show

• The legal name required by the contractor's business form

  A sole-trader invoice adds the individual's name and any business name. When a business name is used, it also gives an address where legal documents can be delivered. A limited-company invoice uses the full incorporated company name. Director names are optional; if the company chooses to list directors, it must list them all. Match that legal identity to the contracted supplier, and return an invoice that names a person when the contract names a company, or the reverse, before it enters the payment queue.

  Sources: GOV.UK, invoices: what they must include

• The full VAT particulars when UK VAT invoicing applies

  A full VAT invoice includes its sequential number, tax point, issue date if different, supplier name, address and VAT number, customer name and address, service description, taxable amount, VAT rate, total excluding VAT, total VAT in sterling and unit price. It is normally issued within 30 days of the tax point. Apply that list only when the supply calls for a UK VAT invoice. An outside-scope foreign B2B service should not acquire UK VAT fields merely because the contractor happens to hold a VAT number.

  Sources: HMRC, VAT guide (VAT Notice 700)

When invoices are settled

The UK statutory window is conditional in a cross-border contract. The Late Payment Act covers B2B supplies of goods or services and excludes employment contracts. A UK-law clause alone does not bring in the Act where the contract has no significant UK connection and foreign law would otherwise govern; choosing foreign law cannot displace it where UK law would otherwise govern and no significant foreign connection exists. Once the Act applies, an agreed B2B period is usually capped at 60 days unless a longer period is fair. With no agreed date, payment becomes late 30 days after the invoice is received or the service is provided, whichever is later.

Sources: Late Payment of Commercial Debts (Interest) Act 1998, section 2, Late Payment of Commercial Debts (Interest) Act 1998, section 4, Late Payment of Commercial Debts (Interest) Act 1998, section 12, GOV.UK, late commercial payments

The currency on the invoice

UK VAT rules allow line values and gross totals on a VAT invoice to be expressed in any currency. When UK VAT is actually charged, the total VAT must also be converted and shown in sterling. For a general-rule B2B service outside the scope of UK VAT, that sterling VAT overlay has no amount to convert. UK VAT law does not make sterling the contract currency, so set the commercial currency, conversion source and rounding rule in the contract instead of inferring them from the supplier's UK address.

Sources: HMRC, VAT guide (VAT Notice 700)

Sending a wholly overseas client into the Chapter 10 determination process

A buyer with no UK residence or permanent establishment immediately before the relevant tax year falls outside Chapter 10. Demanding a status determination statement and a 45-day disagreement process from that buyer applies the domestic client workflow to the wrong party. Record the no-presence facts, then let the worker's intermediary assess Chapter 8 for its engagement. Reopen the boundary if the buyer gains a UK office, branch or an agent that habitually exercises authority to do business; the original onboarding conclusion is only as durable as those facts.

Sources: HMRC Employment Status Manual ESM10006, wholly overseas clients, HMRC, off-payroll working for clients

Rejecting the contractor because no UK VAT number appears

A missing VAT number does not prove that the contractor is below the threshold or improperly registered. General-rule services supplied outside the UK are left out of compulsory-registration turnover, while eligible businesses can register voluntarily and a newly liable supplier can be waiting for its number. First decide whether this service is outside UK VAT. If UK VAT should apply, ask whether registration is pending and require the later VAT invoice within HMRC's timing. If it is outside scope, do not turn a domestic registration field into an invoice defect.

Sources: HMRC VAT Registration Manual VATREG02550, outside-scope supplies, HMRC, VAT Notice 700/1, registration

Applying CIS because the invoice mentions a construction project

CIS starts with the buyer and the work. A construction-related noun on the invoice proves nothing by itself. The buyer must be a construction contractor, or a non-construction business that crosses the £3 million spend test, and the subcontracted work must fall within UK construction operations. An overseas buyer remains in scope when those conditions are met, while ordinary remote design, software or professional services do not enter simply because a building project benefits. Confirm the contractor trigger and the work location before verifying a subcontractor or making a deduction.

Sources: HMRC, Construction Industry Scheme, HMRC, CIS for businesses based outside the UK