IR35 and the non-resident director: does off-payroll working apply to you?

IR35, formally known as the off-payroll working rules, is HMRC's mechanism for taxing contractors who supply services through their own limited company but would be considered employees if they were engaged directly. The concern is disguised employment: someone who works exclusively for one client, follows their direction and control, and is integrated into their workforce — but is paid through a personal service company to avoid employment taxes.

For the typical Arab director who owns a UK company and uses it to hold assets, receive dividends from a business, run an international trading operation, or serve multiple clients — IR35 is very unlikely to apply.

IR35 applies where: an individual provides personal services through an intermediary (typically their own company) to an end client under an engagement that would be employment if direct. The personal service element is key — IR35 requires that the work is performed personally by the individual for a single end client. A company that genuinely operates as a business with multiple revenue streams, assets, or does not supply the director personally to one client is not within scope.

Additionally, since the 2021 off-payroll working reform, the responsibility for determining IR35 status shifted from the contractor to the end client in the public sector and medium/large private sector. This means if an Arab director's company supplies services to a large UK company, that UK company must assess IR35 and, if the engagement is inside IR35, operate PAYE. Small clients — under 50 employees, under £10.2m turnover, under £5.1m balance sheet — put the responsibility back to the contractor's company.

Where it can be relevant: if an Arab director's UK company provides the personal services of that director to a single UK-based client on an exclusive, long-term, direction-and-control basis — the engagement might be inside IR35. In that case, the end client (if medium or large) would need to make an IR35 determination.

Practically speaking, most Gulf-based Arab directors using a UK company for investment holding, property, or multi-client trading have nothing to fear from IR35. If your UK company is used to supply your personal services to a single UK employer-like client, it is worth a conversation with your accountant to confirm the position.