IR35

Also called Off-payroll working, Intermediaries legislation

Rules deciding whether a contractor working through their own company is, in reality, an employee for tax purposes.

What it means

IR35 asks a single question: if the contract between you and the worker did not have a limited company in the middle, would this look like employment?

If yes, the engagement is "inside IR35" and tax and National Insurance are due broadly as if the worker were an employee. If no, it is outside, and the normal company rules apply.

Why it matters

For medium and large clients, and all public sector bodies, the responsibility for making that determination sits with the client, not the contractor — and so does the liability for getting it wrong. Small companies engaging contractors are currently outside that shift, with the contractor's own company responsible.

The financial difference to the worker is substantial, which is why it generates so much heat.

What it looks like in practice

The tests are about the reality of the working relationship, not the wording of the contract: personal service and the right of substitution, control over how and when the work is done, and mutuality of obligation.

If you are the client and the rules apply to you, you must issue a Status Determination Statement giving your conclusion and your reasons, and operate a disagreement process.

HMRC's CEST tool gives an indicative answer. Keep the output.

What to watch out for

Blanket determinations. Deciding that every contractor is inside without considering each engagement is not compliance, and has been found wanting.

A contract that says one thing while the day-to-day working arrangement says another. The arrangement wins.

Where to get proper advice

GOV.UK's off-payroll working guidance is the authority. For anything contested, a specialist employment-tax adviser rather than a general accountant — this is a field of its own.