Frequently Asked Questions
Answers to any questions you may have about umbrella employment, limited companies, or contracting in general.
Does IR35 apply if I work for an overseas client?
IR35 doesn't apply if your end client is based abroad and has no UK presence. If they have a UK office or any connection, then IR35 rules come into play.
Do I have to worry about IR35 if I work through an umbrella company?
No. IR35 rules don't apply to contractors working through an umbrella company.
What does “control” mean with regards to IR35?
The level of control shows how independently a contractor delivers his or her services. In terms of IR35, less control is better.
Why is substitution so important for someone’s IR35 status?
It is essential to demonstrate that any individual with the relevant level of skills, qualifications, and experience would be able to deliver the contractor's services successfully and that their end client does not rely on them personally.
What is an IR35 status?
It is a contractor "tax position" determined by the working practices outlined in their contract. Each contractor's IR35 status is clearly outlined in the Status Determination Statement.
To whom do the IR35 rules apply to?
IR35 rules apply to everyone who uses a limited company otherwise known as a "personal service company", to provide services to their end clients.
What prompts an IR35 investigation by HMRC?
IR35 investigations have historically been triggered when HMRC look into a specific sector.
Is there any way of avoiding IR35?
If you are operating through your own limited company, you cannot avoid an IR35 status determination of your contract.
Can HMRC investigate my IR35 status retrospectively?
HMRC have said they won't typically open up new IR35 enquiries into contracts of the past, but this cannot be discounted entirely.
How is being inside IR35 affect my pension contributions?
The rules on pension contributions are different and depend on whether you are working through an umbrella company or your PSC. We recommend seeking advice from your umbrella provider or accountant.
Can I still claim expenses inside IR35?
You will not be able to claim expenses if you are working through your limited company inside IR35.
What are my options if I’m inside IR35? Is umbrella the only one?
No. You can work through your limited company inside IR35 as well as become an employee of the agency or even the end client.
Do I have to close my limited company if I’m inside IR35 and work through an umbrella company?
No. You can keep your limited company dormant to minimise costs and resume using it if you are offered an outside IR35 contract.
Can my client refuse to work with PSC contractors stating that all PSC’s are inside IR35 (blanket ban)?
No, blanket determinations fail the requirement to take "reasonable care" when assessing the contractor's IR35 status.
Can I still use my limited company (PSC) if I’m inside IR35?
Can I still use my limited company (PSC) if I'm inside IR35?
What can I do if I disagree with my IR35 status determination?
You can challenge the decision, and your client has 45 days to respond. We recommend backing up any challenge with evidence, such as an independent expert review.
How many times will I have my IR35 status assessed?
Every time a new contract is issued or receives an amendment, it requires an IR35 assessment. If you wish to ensure the decision is correct, you can seek the help of a third-party expert to review it for you.
What does “reasonable care” mean?
The end hirer (the end client) is required to take reasonable care when assessing a contractor's IR35 status. If they fail to do so, the IR35 liability will be transferred to the organisation.
What is a Status Determination Statement (SDS)?
The statement has to confirm the end hirer's IR35 assessment and the reasoning behind it.
What is the CEST tool?
The CEST tool is HMRC's online IR35 assessment tool available for everyone to use.
Has the way IR35 is assessed changed?
The assessment of an individual's IR35 status hasn't changed.
What were the Private Sector changes to IR35 in 2021?
From April 2021, it is the end hirer's responsibility to determine a contractor's IR35 status.
What were the Public Sector changes to IR35 in 2017?
In 2017, the Government shifted the responsibility of determining IR35 status from the contractor to the public sector end hirer.
Is there any precedence to IR35 cases in the courts?
There have been many cases of IR35 in the courts that investigated disguised employment.
What is my responsibility as a contractor?
With regards to IR35, you are no longer responsible for determining your IR35 status.
What does the phrase ‘fee payer’ refer to?
The 'fee payer' is the party in the supply chain that is responsible for paying your net earnings after deducting the necessary tax and National Insurance.
What is the recruitment agency’s responsibility and role?
The recruiter is responsible for ensuring that payments for the contractor are processed and paid correctly.
Is there any way I can ensure that my IR35 status is correct?
The Status Determination Statement your end client provides should explain the reasoning behind their decision. You can also test your contract yourself by using HMRC's CEST tool or seek the help of a third party IR35 expert.
How does being inside IR35 affect my finances?
Inside IR35, your PSC income is taxed under PAYE (employment) rules and as such, you will not be able to take advantage of the tax efficiency a limited company can offer.
How do I know if I’m inside or outside IR35?
Your contract will be accompanied by a Status Determination Statement issued by your end client, which will tell you whether your working practices fall inside of IR35.
Who determines a contractor’s IR35 status?
IR35 status determination is the end hirer's responsibility.
How is employment status checked for IR35?
The main tests by which a contract is evaluated are right of substitution, direction and control, and mutuality of obligation.
What is the IR35 legislation?
The IR35 legislation was created to combat "disguised employment". This refers to individual contractors who would be classified as employees of their end client if it weren't for their limited companies.