IR35 is an important consideration for contractors and businesses across the UK. The legislation is designed to address situations where an individual provides services through an intermediary, such as a personal service company, but would be considered an employee if the intermediary were not involved.

For contractors, understanding their IR35 position can help them manage tax responsibilities, contractual arrangements and working relationships more effectively. An IR35 check provides a structured way to assess whether an engagement is likely to fall inside or outside the off-payroll working rules.

This guide explains what an IR35 check involves, the factors that can affect status and the responsibilities contractors should understand.

What Is IR35?

IR35 refers to the UK's off-payroll working rules. These rules are intended to determine how certain contractors should be taxed when they provide services through an intermediary.

The rules are particularly relevant to contractors who operate through a personal service company, commonly known as a PSC.

The key question is generally whether the contractor would have been an employee of the client if they had provided their services directly rather than through the intermediary.

IR35 is not simply determined by the job title or wording of a contract. The actual working practices and relationship between the parties are important when assessing employment status.

What Is an IR35 Check?

An IR35 check is an assessment of a contractor's working arrangement to determine whether the engagement falls within the off-payroll working rules.

The assessment considers various factors surrounding the relationship between the contractor and the end client.

An IR35 check may consider:

• The written contract
• The actual working practices
• Control over the work
• Personal service and substitution
• Mutuality of obligation
• Financial risk
• Provision of equipment
• Integration within the client's organisation
• Opportunity to make a profit
• The overall nature of the engagement

No single factor automatically determines the outcome. The overall circumstances of the engagement need to be considered.

Why Is an IR35 Check Important?

An accurate IR35 check can help contractors and businesses understand their tax and employment status.

If an engagement falls within the off-payroll rules, the way payments are processed may change. Depending on the circumstances, the fee payer may need to account for Income Tax and National Insurance through PAYE.

For contractors, understanding the status of an engagement can help with financial planning and contractual discussions.

For businesses, appropriate status assessments can support compliance with their responsibilities under the off-payroll working rules.

Who Is Responsible for the IR35 Decision?

The responsibility for determining IR35 status depends on the circumstances and the size and type of the client.

For engagements involving public sector organisations and many medium and large private sector clients, the client will generally be responsible for determining the contractor's employment status for tax purposes and communicating the conclusion through a Status Determination Statement.

For some smaller private sector clients, the contractor's intermediary may remain responsible for determining the status.

Because responsibilities can vary, contractors should understand who is responsible for making the determination in their particular engagement.

Looking Beyond the Contract

One of the most important aspects of an IR35 check is that the written contract is not necessarily the only evidence considered.

The actual working relationship can be highly relevant.

For example, a contract may describe someone as an independent contractor, but the practical arrangement may involve significant client control over how, when and where the work is performed.

Similarly, the written agreement may contain substitution rights, but the practical ability to use a substitute may be limited.

This is why contractors and clients should ensure that the written contract accurately reflects the real working relationship.

Control and Direction

Control is an important factor when considering employment status.

An IR35 check may consider who determines how the work is carried out, when it is performed and where it is completed.

A contractor who has genuine autonomy over how they deliver a project may have characteristics associated with an independent business relationship.

By contrast, extensive control by the client may indicate characteristics more commonly associated with employment.

The exact circumstances need to be considered rather than relying on one factor in isolation.

Personal Service and Substitution

The ability of a contractor to provide a substitute can be relevant to an IR35 assessment.

A genuine right to provide another suitably qualified person to complete the work may indicate that the contractor is operating as an independent business.

However, the contractual wording alone may not be enough. The practical reality of whether substitution is genuinely available can also matter.

Contractors should therefore understand the substitution clause in their contract and how it operates in practice.

Mutuality of Obligation

Mutuality of obligation refers broadly to whether the client is expected to provide work and whether the worker is expected to accept it.

The nature and extent of ongoing obligations between the parties can be relevant when assessing employment status.

For example, a project based arrangement with clearly defined deliverables may differ from an arrangement where the contractor is continuously expected to accept work and perform ongoing duties.

Again, this is one factor among several that should be considered as part of the overall assessment.

Financial Risk and Opportunity for Profit

Financial risk can also be relevant to an IR35 check.

Independent contractors may have greater responsibility for correcting defective work, managing expenses and controlling the profitability of their business.

They may also be able to increase profit through efficient delivery of projects.

An arrangement where the contractor bears little financial risk and receives payment in a way similar to an employee may have different characteristics.

Contractors should ensure that their commercial arrangements accurately reflect how the engagement operates in practice.

Equipment and Business Independence

The equipment used during an engagement may also be considered.

Employees are often provided with the equipment and resources they need by their employer. Independent contractors may use their own equipment or resources, although this is not always the case.

Other indicators of business independence can include having multiple clients, maintaining a separate business identity and taking responsibility for business expenses.

These factors do not automatically determine IR35 status but can contribute to the overall assessment.

How Contractors Can Prepare for an IR35 Check

Contractors can take several practical steps to prepare for an IR35 assessment.

First, they should keep a copy of their written contract and any amendments. They should also maintain records showing how the engagement operates in practice.

Useful records may include:

• Statements of work
• Project documentation
• Invoices
• Timesheets
• Client communications
• Evidence of project deliverables
• Substitution arrangements
• Records of business expenses

Keeping clear evidence can help demonstrate the commercial nature of the engagement.

Common IR35 Check Mistakes

Contractors and businesses can make several mistakes when assessing IR35.

One common mistake is relying entirely on the contract while ignoring actual working practices.

Another is focusing on a single factor, such as the contractor's job title or ability to work remotely.

Some businesses also use generic assessments without considering the specific engagement.

A proper IR35 check should consider the complete working relationship and the circumstances of the particular contract.

Reviewing Changes to an Engagement

An IR35 assessment should not necessarily be treated as permanent if the working relationship changes.

For example, changes to responsibilities, working arrangements, control, project scope or contractual terms could potentially affect the assessment.

Contractors and clients should review significant changes and consider whether the existing status determination remains appropriate.

Keeping contracts and working practices aligned can help reduce uncertainty.

Professional Support for IR35 Checks

IR35 can be complicated, particularly where working arrangements involve multiple parties, recruitment agencies or personal service companies.

Professional IR35 services can help contractors and businesses understand the relevant factors and organise appropriate documentation.

An adviser can review the engagement, identify areas that may require attention and help explain the implications of the assessment.

Professional support does not replace the need for accurate information. Contractors and clients should provide complete details about the actual working relationship so that the assessment can be properly considered.

How The Infinity Group Can Help

The Infinity Group provides professional business and financial support services for UK organisations and contractors. Its range of services includes payroll, tax, accounting and compliance related solutions.

For contractors and businesses dealing with IR35 considerations, professional guidance can help make the assessment process more organised. The Infinity Group can support clients with understanding financial and compliance responsibilities and developing appropriate administrative processes.

Contractors should discuss their specific engagement and working practices with an appropriate adviser when they require specialist IR35 guidance.

IR35 and Contractors Using Umbrella Companies

Contractors who work through a genuine umbrella company arrangement are generally paid through PAYE. This differs from contractors providing services through their own personal service company.

However, contractors should still understand the terms of their employment arrangement and how payments are calculated.

They should review payslips carefully and be cautious about any provider offering unusual payment structures or unrealistic take home pay promises.

Clear payroll documentation is important regardless of the structure being used.

Conclusion

An IR35 check is an important part of managing off-payroll working arrangements in the UK. It helps contractors, clients and other parties understand whether an engagement is likely to fall within the relevant off-payroll working rules.

The assessment should consider the written contract as well as the actual working relationship. Factors such as control, substitution, mutuality of obligation, financial risk, equipment and business independence may all be relevant.

Contractors can prepare by keeping accurate contracts, project records and evidence of their working practices. Businesses should also review arrangements when circumstances change.

With appropriate professional support from providers such as The Infinity Group, UK contractors and businesses can approach IR35 and wider compliance responsibilities in a more organised way. Understanding the rules and maintaining accurate records can help create greater clarity around contractor engagements and tax responsibilities.