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Sole trader status and IR35

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How IR35 interacts with sole trader arrangements, and where the line between self-employment and employment actually sits.

IR35 does not reach a sole trader directly

IR35 applies to work supplied through an intermediary — typically a personal service company. A sole trader has no intermediary, so the legislation does not apply to them.

That is a narrower statement than it sounds, and it is routinely misread as “a sole trader has no status risk”.

The rules that do apply

  • Employment status law, which decides whether the person is genuinely self-employed at all.
  • Agency legislation, which can require PAYE where a worker is supplied through an agency and subject to supervision, direction or control.
  • The Construction Industry Scheme, where the work falls within it.
  • The end client’s own liability if the engagement is later recharacterised.

Where the line sits

The same tests decide it: control, substitution and mutuality of obligation. A sole trader working to a client’s rota, on the client’s equipment, with no right to substitute, is exposed regardless of what the invoice says.

The exposure sits with the engager as much as with the worker, which is why many clients decline sole trader engagements outright.

The practical route

Where the working pattern looks like employment, an employment model — umbrella or PEO — removes the argument rather than winning it.

Talk to us about sole trader status and IR35

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Hannah Whitfield

Hannah Whitfield

heads compliance and IR35 advisory at Promultis

Hannah Whitfield has spent fifteen years on the compliance side of contract staffing, first inside a national recruiter and now leading the advisory team at Promultis. She writes and reviews the status determination processes that hiring firms rely on when HMRC asks how a decision was reached, and has guided clients through both the 2021 reform and the 2024 offsets. Her work covers umbrella and PEO engagements across construction, energy and technology. Hannah is a frequent speaker on supply chain liability and believes most compliance failures start as documentation failures.

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