Inside or outside of IR35?

The question the rules ask

IR35 asks a single question: if the intermediary were removed, would this look like employment? Everything else is evidence for that one conclusion.

It is answered on the working reality, not on the words in the contract — although a contract that contradicts the reality makes the position harder to defend, not easier.

The three main tests

• Control: who decides what is done, how, when and where.
• Substitution: whether a genuine, unfettered right to send a qualified replacement exists and could actually be used.
• Mutuality of obligation: whether the client must offer work and the worker must accept it.

Beyond those, financial risk, provision of equipment and whether the worker is part of the organisation all carry weight.

What each conclusion means

Inside IR35 means employment taxes are due on the engagement, deducted before the worker is paid. Outside means the worker’s intermediary is taxed on its profits in the ordinary way.

The difference in take-home is real, which is precisely why a determination has to be reached honestly rather than to a preferred answer.

If you disagree

A determination can be challenged, and the client has 45 days to respond with reasons. Use it — a challenge that surfaces a factual error is far cheaper than an enquiry that surfaces it later.