Sole trader status and IR35

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.