IR35 is the legislation designed to identify disguised employees working through their own limited companies (PSCs). The crucial test is whether a contractor is working any differently to an employee of the client, if not they should be taxed as an employee.

IR35 only affects contractors working through PSCs or partnerships. Contractors working though umbrella companies, CIS self-employed workers and those on agency PAYE payrolls are out of scope.

There is no one factor that’s determines IR35 status, HMRC evaluate the role and relationship by looking at several key factors, which increase or reduce the likelihood of being ‘caught’ by IR35.

  • Right of Substitution

  • Mutuality of obligation

  • Control

  • Financial Risk

  • Part & Parcel (integration within end hirer’s organisation)

  • Employee benefits enjoyed

  • Tools & Equipment supplied (by contractor)

  • Length of contract

  • Termination clauses

  • Intention of parties