How should we deal with IR35.

Posted May 28 ,2020

Information for Candidates,General Information

First of all it’s worth saying I make no claim to be an “expert” on this but I have researched extensively and asked some of the difficult questions. You may have different views and I would welcome those.

I am not, here, going to discuss whetherIR35 is a good thing or a bad thing. We all have our views on that but it would appear it’s definitely coming so I think we all need to be prepared and I have seen a lot on content that I think could be misleading.

Why has IR35 come about?


We don’t have to go back that far in history to find days when the ordinary man was hardly taxed at all. In fact income tax only became a regular and permanent feature of life in the UK in 1842. It’s worth remembering though that at that time also there were few social care services and no NHS.

Whether we agree with taxation or not – it’s a routine part of life today.

In the latter years of the 20th century there was a growing tendency for individuals to provide services as interims or contractors via Ltd companies to take advantage of the tax and NI benefits. Sadly there can be little doubt that there was a high level of abuse of this, most TV presenters at the time were contractors (despite working for the TV businesses for many years) and, in particular but not exclusively, in IT, a large number of people worked for the same company for many years but as an “independent” contractor.

The government sought to close this gap and to recoup the lost revenue both in terms of income tax and employee and employer NI.

They concentrated first on the public sector and for most of the time the determination and responsibility for any unpaid tax etc. lay with the contractor/interim.

Since 2015 a series of changes have shifted this responsibility and accountability to the client or fee payer and in 2021 (originally 2020 but postponed due to Covid19) these reforms will be rolled out to the private sector.

The aim is to clamp down on what HMRC perceive as inappropriate off payroll working solely as a means of avoiding tax and NI.

Inside or outside IR35










What determines IR35 status?


First of all it only applies to Ltd companies, partnerships or unincorporated associations! If you operate as a sole trader then IR35 does not affect you.

If you operate as a Ltd Company or partnership (I don’t know of anyone who operates as an “unincorporated association”) then you need to determine whether any contract falls inside or outside IR35.

I have seen many comments and posts saying this thing or that thing is key to determining your status but my investigations and research suggest there is no one thing that is going to determine your status and is certainly not, on its own, going to change status from one to another.

I believe that each contract needs to be looked at from the very beginning to determine the status and some of the key determinants will lie in the fundamental nature of the contract – trying to change this fundamental status by fiddling with different constraints is unlikely to be successful.

Lets go back to first principles then.


Is the contract for you to carry out a piece of work with a specific result in mind, a transformation or implementation of a new business process or system? It is highly likely that, with careful design and agreement with the client, this type of contract can remain outside IR35.

Alternatively is the contract to cover someone else due to absence, maternity leave etc. or to cover a gap in the management structure of the client business? This is highly unlikely to be able to be shaped to be outside IR35 without some difficult and unusual arrangements with the client.

With the above in mind let’s look at some of the elements typically used to determine IR35 status.


  1. Office Holder

    This seems to be quite key. If you are going to be an office holder, or even if you will be given a title and be part of the organisation chart then this pushes towards Inside IR35.

    Of course if you are a stand in it is highly likely you will be covered by these things whereas as a deliverer of a project it is unlikely these would apply. If you are expected to operate at board level the client may want to give you a title but it does seem to be important to ensure that any identification clearly indicates you are independent.

    The boss
  2. Control

    Does the client have the right to determine how the work is done? I include in this section the right of substitution. It does not appear to me that the right of substitution is something separate and nor is it on its own a determinant one way or the other.

    If the client has control over how, when, where you work then this pushes towards Inside IR35. It would seem to be ok for the location to be set by the task but other forms of control should be avoided.

    The ability of the client to move you to other tasks and roles in particular should be avoided.

    Again this section would seem to indicate that interim roles where you are covering a gap and so are likely to be controlled and have to work in locations determined by the client, and particularly if the client can move you from one task to another  (even if you have to agree) are clear indicators if Inside IR35 status. It is unlikely that the mere insertion of a substitution clause would change this fundamental status!

    A project or transformational role on the other hand is much more likely to rely on your expertise to deliver a specific result in ways that you determine. A project based role is also unlikely to have any possibility of moving from this one task to another. These would be clear indicators of outside IR35 status.
  3. Financial Risk

    No this doesn’t mean that you have to be paid in bonuses only. It does question whether you are paid by the day or for a piece of work (whether in one go or in segments depending on completion of specific pieces of work.

    Also included here are questions of whether you have outgoings upfront of being paid and whether you provide some or all of your own equipment and, quite crucially, whether you are financially responsible for correcting any defects in your work.

    Typically employees ( and therefore interims and contractors likely to be inside IR35) will be paid based upon attendance and will be provided with all equipment required to do the job. They will also be unlikely to be financially liable for defects in their work.

    Project based roles, paid for pieces of work with satisfactory completion required before payment are much more likely to be classed as outside IR35.
  4. Involvement with the client business.

    There are a number of things to avoid here if the role is to be exempt from IR35. If you can enjoy paid for company benefits such as discounts, gym memberships, social gatherings etc. then you are behaving like an employee.

    Also if you have management responsibilities such as determining pay rates, hiring people, carrying out appraisals (or being appraised!) then again you are likely to be assessed as being part and parcel of the client business – i.e. essentially an employee and therefore inside IR35.

    Once again we see that many of these things are more easily avoided and unlikely to occur in a project or transformation based role rather than a traditional stand in or gap covering interim or contract role.

    Terms and Conditions
  5. Finally – Contractual arrangements.

    Employees are typically unable to work for other businesses whilst employed or at the least to have to ask permission. They also have limited or no rights to any IP developed whilst employed and, of course, they enjoy continuity of employment.

    Continuity of employment could be indicated by having worked for the same client numerous times, the contract being extendable or likely to result in further work. All of these would indicate and inside IR35 status.

    If on the other hand this is a one off, contract to deliver a specific piece of work with limited likelihood of further work and no history of other work then this would indicate true self employed status. Similarly the ability, or preferably the actuality, of working for other clients simultaneously and/or having multiple income streams with this contract forming only a limited part of the overall annual income would all indicate true self employment and therefore an outside IR35 status.



The status of a contract is most likely determined by the fundamental nature of the job or role, “fiddling” with the contract, particularly in ways which are not reflected in the actual work, is unlikely to result in a status which is at odds with this fundamental nature.

If the role is essentially one of filling an organisational gap or standing in for someone who is absent or ill then it is most likely going to be determined as Inside IR35. It would be better to recognise this from the outset and mitigate the financial impacts as far as possible.

This type of role may be assessed as outside IR35 where it is provided by a company which has the right to, and does, supply multiple people to do the role without reference to the client (The substitution clause) but in my opinion this is unlikely to actually be true for many management roles. It may be true of things like IT delivery of implementation or programming or for non technical contracting roles but beware of using substitution alone to try to alter the actual nature of the role and contract and your engagement with the client.


If on the other hand the role is to deliver a specific and measurable change, transformation, implementation then careful design of the role and the supporting contract can ensure an Outside IR35 assessment.

Some clear things to avoid:


  1. Having a title or status in the client business.
  2. Agreeing hours of work or place of work (unless dictated by the task)
  3. Direct supervision or management of your work.
  4. Being paid by the day rather than for the work.
  5. Being provided with equipment needed to do the job.
  6. The ability of the client to change the nature of the task (even with your permission)
  7. The possibility of contract extensions or multiple ongoing contracts.
  8. Behaving and being rewarded like an employee
  9. Having direct supervision of and appraisal responsibility for other employees
  10. Being appraised and subject to bonus based on performance (Bonuses based on delivery of benefits or changes etc. may be different if carefully worded and form part of the initial contractual agreement.
  11. Being constrained in the ability to work for other clients or pursue other income streams.

Some things to try to include in the engagement:


  1. Freedom to decide how the work is delivered
  2. Freedom to determine timescales and work patterns
  3. Payment for completion of specific, measurable pieces of work.
  4. A requirement to deliver at your own risk and cost if there are failures or defects.
  5. Freedom to be known and introduced as your own business.
  6. Freedom from direct supervisory and performance appraisal relationships (up and down) in the organisation.
  7. Freedom to engage with other clients and/ or other parts of your business simultaneously.
  8. A clear definition of what is to be delivered by the role with associated payment and a clear end point once delivery is complete.


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