IR35 basics every contractor should know

IR35 asks one question: if the company and agency vanished, would this look like employment? If yes, the engagement is 'inside IR35' and taxed broadly like a job. If no — a genuine business-to-business service — it's 'outside', and the normal company tax planning applies.

The three big tests

Tribunals also weigh financial risk, equipment, integration into the client's organisation, and whether you're 'part and parcel' of it. No single factor decides; the picture does.

• Personal service: can you send a suitably qualified substitute, genuinely? A real right of substitution is the strongest outside indicator.
• Control: does the client control how, when and where you work — or just the deliverable? Autonomy points outside; being managed like staff points inside.
• Mutuality of obligation: is the client obliged to offer work and you to accept it beyond the current piece? Ongoing obligation smells of employment.

Who decides

Since the off-payroll rules, medium and large clients determine status and must issue a Status Determination Statement; the fee-payer deducts tax if inside. Engage with a small client and the old world applies: your company self-assesses, and the risk sits with you. Either way, understanding your own position is not optional — determinations can be wrong in both directions and can be disputed.

Money and protection

Inside engagements lose the salary/dividend planning and typically net 20–30% less than an outside contract at the same headline rate — which is why rate negotiations should always be status-aware. For outside contracts, protection is practical: a contract that reflects reality, working practices that match it (invoice by deliverable, use your own kit, don't appear in the client's org chart), and a contemporaneous file showing why the tests point outside. Our £99 contract review covers contract and working practices together — because HMRC reads both.