Question 1

What is IR35 and why does it matter in 2025/26?

Accepted Answer

IR35 is tax legislation (the 'off-payroll working rules') that determines whether a contractor working through a limited company is genuinely self-employed or is effectively an employee for tax purposes. If your engagement is caught by IR35 (inside), you pay income tax and National Insurance as if you were an employee — typically reducing take-home pay by 25–30%. The rules have applied to the public sector since 2017 and to medium/large private sector clients since April 2021.

Question 2

Who is responsible for determining IR35 status?

Accepted Answer

For medium and large private sector clients (and all public sector clients), the end client is responsible for making the IR35 determination and issuing a Status Determination Statement (SDS). For small private sector clients (two of: turnover under £10.2m, balance sheet under £5.1m, fewer than 50 employees), the contractor's own limited company makes the determination. HMRC can challenge any determination — even one made by a large client.

Question 3

What is HMRC's CEST tool and is it reliable?

Accepted Answer

CEST (Check Employment Status for Tax) is HMRC's official online tool. HMRC says they will stand behind results produced by CEST if the information entered is accurate. However, many IR35 specialists consider it unreliable because it omits Mutuality of Obligation — a key test from case law — and returns 'unable to determine' for borderline cases. For high-value engagements, an independent IR35 review from a specialist is recommended.

Question 4

What are the most important IR35 factors?

Accepted Answer

The three primary tests from case law are: (1) Substitution — a genuine right to send someone else is the single strongest indicator of being outside IR35; (2) Control — if the client controls how, when and where you work, it looks like employment; (3) Mutuality of Obligation — if the client must offer work and you must accept it, this points to employment. Secondary tests include financial risk, equipment provision, and whether you are integrated into the client's organisation.

Question 5

What's the difference between IR35 and the off-payroll working rules?

Accepted Answer

IR35 is the original 2000 legislation that made contractors' limited companies responsible for determining status and paying tax if caught. The 'off-payroll working rules' (Chapter 10, ITEPA 2003) are the 2017/2021 reform that shifted responsibility for determination to the end client (for medium/large businesses). In practice, 'IR35' is used colloquially to refer to both regimes.

Question 6

How can I strengthen my IR35 position?

Accepted Answer

Key steps: (1) Ensure your contract contains a genuine, unrestricted right of substitution and reflects your actual working practices; (2) Operate as a business — have your own website, work for multiple clients, carry professional indemnity insurance; (3) Avoid integration — don't accept a company email, don't attend staff events as an employee; (4) Work on defined deliverables with project-based milestones rather than open-ended time-and-materials; (5) Bear financial risk — for example, fix defective work at your own cost.

IR35 Status Checker 2025/26

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