If you are caught within the legislation then you can expect to pay about 25% more in tax every year, so you want to try and ensure that it does not apply to you!
Despite having been in force since 1999, it is heavily criticised by tax experts and the business community as being poorly conceived, badly implemented by HMRC and causing unnecessary costs and hardships for genuine small businesses.
If you are a genuine professional contractor, freelancer, interim or consultant who is in business on your own account, you should have nothing to fear from IR35. This is so long as you take the time to understand how the legislation works and apply best practice to ensure it does not apply to you, and have a defence prepared if investigated by HMRC.
You can start by using our IR35 calculator below to determine how much extra tax you would have to pay if caught, and also use our free online IR35 status test to determine your status. Then our comprehensive guides will explain how you can ensure you never get caught by it.
If the rules apply to you then you have to pay tax as if you were employed directly by the client, including employers and employees National Insurance Contributions.
But you will not get any employment rights. Use the calculator below to work out the financial impact on you.
^ TopWhat is IR35?
What is IR35? Does it apply to your contract?
It is tax avoidance legislation designed to ensure workers using an intermediary but who are ‘disguised employees’ pay the correct amount of tax.
IR35 history & overview
A timeline and oveview of the legislation since it was introduced in April 2000.
When should contractors start considering IR35?
Advice and guidance for when to start addressing the issues.
What is a disguised employee?
Limited company contractors will find themselves labelled as ‘disguised employees’ and caught if they pass the tests of employment.
^ TopFinancial Impact of IR35?
Financial impact of IR35 on contractors
A contractors take home pay is reduced by up to 25% when caught.
Contractors inside IR35 pay 14% more tax than permanent employees
If you are inside it and being paid via a deemed payment you will pay 14% more tax than a permanent employee, but get no rights.
The IR35 5% expenses rule
Explains the Inland Revenue 5% expense rule.
Limited company contractors with contracts inside and outside IR35
Having contracts both inside and outside need not be complicated for you to deal with.
IR35 penalties: the cost to contractors of being caught inside
Working on contracts inside means you must pay extra tax and, if caught without declaring it, you face steep HMRC penalties.
^ TopEvaluating your status
IR35 Rules: How to determine if your contract passes
Signing a contract without checking whether it passes is taking a huge risk. Here’s what to look for before signing the contract.
The importance of taking legal advice for IR35 compliance
Explains why it is important to seek legal advice for compliance.
IR35 contract problems: Top 10 reasons a contractor’s contract will fail
Contractor contracts are vital evidence that can be used by HMRC to place a contract inside. Don’t let your contract fail and cost you cash.
Reviewing your contract for IR35 status – a guide for contractors
You should always get your contract reviewed for status by an expert, to ensure you have taken ‘reasonable care’ in the eyes of HMRC.
Contractor guidance on HMRC’s six IR35 example scenarios
You can use HMRC’s six example scenarios to help you decide whether it is likely to apply to your current contract.
If the client requests me personally, am I caught by IR35?
Many contractors who are the leaders in their field find themselves working for clients who will accept no substitutes. But this does not mean that the contractor is caught.
Landmark tribunal judgement tells us who is an employee
The UK Employment Appeal Tribunal in London has handed down a critical decision on the definition of a worker--it directly affects contractors who could be considered employees.
Does length or number of contracts affect IR35 status?
Does how long you work at a place, or the fact that you have several different contracts affect your status?
IR35 myths: 10 factors that don’t really affect your status
Contractors are right to be concerned, but are sometimes misinformed. The top ten contracting myths.
Half my contract is onsite and half at home – am I caught by IR35?
Significant variations during a contractor’s contract can lead to different treatment.
Independent contractors – what are they? Employed or self employed?
Independent contractors are workers who are in business on their own account & provide their expert services to clients under a contract for services.
I’ve been outside IR35 and now think I’m caught. What should I do?
Contractors experiencing a sudden change of circumstances mid-way through a contract may find this alters their status and hits their finances.
IR35 applies to office holders unless there is no personal service
It will apply to any contractor who becomes an office holder unless they can prove that personal service is not required.
Contractor guide on when IR35 will apply to overseas contracts
Contractors domiciled in the UK and working on overseas contracts will find that it still applies in most cases.
^ TopIR35 Business Entity Tests
IR35 Business Entity Test for contractors – process and questions
You can help determine your level of risk by taking HMRC’s business entity tests, answering 12 questions about your business.
Contractor guidance on HMRC’s risk-based approach to IR35 & the business entity tests
You can use HMRC’s business entity tests to gauge your risk, which could lead to 3 years of free contracting.
^ TopPublic sector off-payroll rules
Contractor guide to the UK public sector off-payroll rules
From September 2012 contractors with public sector contracts may have to demonstrate to their clients that the off-payroll rules don’t apply to them.
^ TopContracts & IR35
IR35 Explained: ‘Contract of service’ and ‘contract for services’
In addition to defining employment status, contracts ‘of service’ and ‘for services’ bring rights and responsibilities for contractors and employees.
How contractors should word contracts to keep outside IR35
How to carefully word contracts avoiding terms used by employers ensuring you remain outside.
IR35 danger: when your contract is different from the agency-client contract
HMRC always obtains the agency-client contract and compares it with the contractor contract. They rarely agree, and this spells trouble.
Negotiating your contract for IR35 compliance
If you have been offered a contract which is caught, or are in a contract that is caught you’ll need to consider negotiating changes to get it outside. We explain how.
Contractors need the IR35 confirmation letter
Getting a confirmation of terms letter from the client could save you endless trouble and expense if you need to prove that you are outside.
Covering letters persuading clients to sign an IR35 confirmation of arrangements
Contractors facing challenges securing a signed confirmation of arrangements from a client may find a well-structured covering letter does the job.
Contracts alone won’t protect contractors from IR35
Former tax inspector Carl Whittaker from Qdos Consulting talks to ContractorCalculator about his experience of debating notional contracts with HMRC.
Contractors staying outside IR35: setting expectations with a letter to the client
A contractor’s covering letter sent with a confirmation of arrangements to a client manages expectations.
IR35 - a contractor's best defence starts before signing the contract
If you undergo an investigation by HMRC you can suffer years of financial and personal stress before your case is resolved. Be prepared.
Contracting termination clauses that avoid IR35 risk
The termination clause in a contract can result in a ruling going either way.
Getting an IR35 free contract and passing the rules
Practical advice about how to negotiate a services based contract with your agent.
Advice on buying an IR35 free contract
Is it worth spending money on buying an 'IR35 Free Contract' ?
Can I change contract terms to be outside IR35 during a contract?
Changing contract terms to be outside it during an existing contract.
IR35 legal dangers of the standard agency contract
John Antell describes the dangers involved with standard agency contracts and explains what to look out for.
What contractors need to know about IR35 compliant contracts
Contractors need to understand that no contract can in itself remove the threat of investigation from the Revenue.
IR35 contracts, agencies and issues
Examination of the grey areas between client, agent and contractor.
IR35 negotiations - use employment rights to gain client cooperation
Contractors can use the threat of claiming employment rights as a bargaining chip with clients following two key rulings, says Andy Vessey of Qdos.
^ TopAvoiding IR35
Can your accountant keep you outside of IR35?
You should hire specialist accountants who can ensure you are taking all necessary steps to stay outside.
Prove your contract is outside IR35 by collecting key evidence
Contractors generate evidence about it every day and by filing it they could halt an HMRC review at the outset.
How contractors should prove being outside IR35
You should arrange to obtain and to keep certain documents to prove, as best as one can, that you are outside it.
IR35 - Top 10 traps to catch the unwary contractor
HMRC is always on the lookout for contractors who put themselves inside it by making easily avoidable mistakes. Here are the top ten traps to avoid.
Can contractors using umbrella companies be caught by IR35?
Does working for an umbrella company enable you to avoid it?
International contracting and IR35
Where you pay taxes determines whether or not you have to worry. If you pay in the UK, then you have to worry.
Protect your contracting status by building an IR35 compliance file
If you create and maintain compliance files you can rest assured you will be able to prove your status.
Contractor strategies for long term IR35 defence
You can be taking action now to help build a future defence.
IR35 avoidance: Staying outside if you go contracting for your former employer
When contracting for a former employer, you must prove your new relationship is different.
Contractors must demonstrate business risk as part of keeping contracts outside IR35
Demonstrating business risk can show a contractor as ‘being in business’, thereby helping the case for being outside..
IR35 and contracting bonuses – how to manage bonus payments
Contractors must adopt the correct terminology when agreeing to performance-based bonuses for a project.
IR35 issues for project managers working as contractors
Project managers can stay outside as long as they have no line management responsibilities.
Keeping control keeps IR35 away from contractors
To stay outside, you should ensure you are not under the supervision, direction and control of your clients.
Contracting top 10: Making sure IR35 won’t apply to you
HMRC is constantly on the lookout for ‘disguised employees’. Here are ten precautions you can take to ensure you don’t get caught.
^ TopIR35 & Substitution
If my client lets me substitute purely for IR35, would it count?
Using a substitute means you could enjoy 3 years of contracting, according to HMRC’s business entity tests.
Contractors can avoid IR35 by using substitutes, subcontractors and helpers
You can use other workers to help fulfil contracts and thereby prove those contracts are outside.
Put yourself outside IR35 by bringing in expert help
Contractors can apply simple strategies to add weight to their status by employing expert sub-contractors to work on their contracts.
IR35 and the right of substitution: convincing clients to accept the clause
To avoid being caught a right of substitution clause can be a key factor. But, how do you convince the client or agency to include one?
Contractors should use right of substitution in contracts
It’s wise to have a right of substitution clause in contracts to help remain outside. Make sure it’s phrased properly and don’t rely only on the clause alone.
IR35 and substitution: substituting twice a year could save contractors thousands
Mounting evidence suggests that a contractor’s genuine right of substitution, if exercised, is the key status factor outweighing all others.
Contractor guide to using substitution to stay outside IR35
If you are able to make unfettered substitutions you can use substitution to stay outside.
^ TopWorking conditions
Why can't I use the company canteen?
Contractors can't expect to use the company canteen or to enjoy other employee rights because they risk falling inside.
Being "in business on your own account" is key for contractors to stay outside IR35
If you are able to show you are in business on your own account you are on your way to staying outside. The objective is to prove you are not 'part and parcel'.
Contractors must not be 'part and parcel' of clients to avoid IR35
One of the tests used to prove employment status is being 'part and parcel' of an organisation. You should avoid this at all cost.
^ TopMitigating IR35 Taxes
Reducing the IR35 pain with a contractor pension
Reduce the pain of it by diverting your taxes into a pension and achieve up to 48% tax relief.
Umbrella companies and IR35
Explains whether it can be avoided using an umbrella scheme.
Dealing with multiple contracts being inside and outside IR35
Accounting requirements when you have contracts both inside and outside IR35.
^ TopLegal Points
Contractor guide to Mutuality of obligation (MOO) and IR35
Mutuality of obligation is one of the key factors used by a court or tribunal to determine whether it applies and a contractor’s employment status.
Contractors caught by IR35 who believe the agent was at fault have few grounds to sue
Contractors may blame their agent for landing them with a contract inside, but they have few legal options.
Contractor guide to IR35 case law
Case law is fundamental to the workings of the UK legal system and is often used to determine whether a contractor is inside or outside.
^ TopIR35 & employment rights
Should contractors inside IR35 have employment rights?
Contractors caught by the legislation are taxed like employees, yet they have no employee rights unless they go to court to claim them. An unfair situation that the Government should resolve.
Why contractors caught by IR35 cannot necessarily claim employment rights
Roger Sinclair of Egos dashes the hopes of contractors caught by it claiming employment rights from their clients.
^ TopHMRC Advice
Contractor guide to HMRC’s IR35 contract review service
You can ask HMRC to review you contract, but this could increase the risk of an enquiry, particularly if the contract is borderline.
Contractors can use HMRC's employment status resources to help with IR35 status
HMRC’s online manuals for tax inspectors’ use provide contractors with insights into how not to be seen as an employee and how to stay outside.
HMRC IR35 information and advice - a guide for contractors
Contractors can access information, guidance & advice online and by phone from HMRC, but it comes with a health warning as there are grey areas.
^ TopHMRC Investigations
What triggers an HMRC IR35 investigation?
Contractors will find that a range of factors could trigger an investigation, and the days of a random inspection are long gone.
How to avoid an IR35 investigation
Contractors can adopt a range of strategies to reduce the risk of an HMRC investigation.
IR35 reviews by HMRC: how they work
Undergoing a review by HMRC means facing a long, stressful investigation process.
IR35 compliance letters – contractor guidance on how to respond
Contractors receiving a new-style compliance letter from HMRC should only respond after seeking expert help.
Contractor HMRC inspections: do you have your IR35 life raft ready?
All contractors are HMRC investigation targets but will have nothing to fear with good preparation.
Contractors who involve expert IR35 advisors can close down HMRC investigations early
Early intervention by expert advisors can prevent HMRC investigations turning into full blown status reviews.
Contractor appeals against HMRC IR35 rulings
Contractors who have been found by HMRC to fall foul and been presented with a large bill for back taxes can appeal to the tax tribunal.
Taxman’s tactics – what contractors should look out for when an IR35 investigation looms
You should avoid trying to deal with a tax inspection without the benefit of specialist help.
IR35 and contracting: just why do cases take so long to be resolved?
You can be forced to endure years of stress before your case is resolved with HMRC.
Contractor guide to using the Taxpayers’ Charter during tax and IR35 investigations
Contractors can use the Taxpayers’ Charter to help during investigations if they believe HMRC has behaved badly.
IR35 taxes uncollectable if contractors’ company has no money
Contractors falling foul and whose company has no cash to pay any tax due to HMRC are safe from personal liability.
^ TopIR35 Experiences
IR35 case study 2 - a contractors story
A contractor explains his frustrations at trying to negotiate a services based contract with an agency.
IR35 case study 1 - a contractors IR35 story
A contractor explains how he used a legal expert to get his contract passing IR35.
^ TopIR35 Insurance
IR35 insurance – cover yourself with contractors’ tax investigation cover
Contractors investing in insurance are buying peace of mind. Or are they? Not all policies are what they seem, so check the small print.
Can I get financial protection against an IR35 investigation?
How can a contractor protect themselves financially against an investigation.
^ TopSpecial reports
IR35 Special Report - 10 years of IR35
ContractorCalculators special IR35 report, on the 10th anniversary of IR35. 10 years that shook and shaped the world of UK contractors
IR35 After 15 Years
History, analysis, and ultimate contractor guide to avoiding IR35.
^ TopWhere to get IR35 help
The following organisations have specialist knowledge of IR35: