IR35 is the UK's way of stopping contractors from being taxed as businesses when they really work like employees. Since the off-payroll reforms, getting the call right is the hiring organisation's job, not the contractor's.
Key facts
- IR35 is UK tax legislation that decides whether a contractor working through their own limited company should be taxed as an employee for a given engagement.
- Since the off-payroll reforms, the hiring organisation is responsible for the status determination, not the contractor.
- A wrong determination means unpaid tax and penalties, and HMRC enforces it.
Contents
- What is IR35?
- Inside vs outside IR35
- Who is responsible for IR35
- How to stay IR35 compliant
- Frequently asked questions
- Managing IR35 across your contractors
What is IR35?
IR35 is UK tax legislation that decides whether a contractor working through their own limited company should be taxed as an employee for a given engagement. It targets "disguised employment", where someone works like an employee but is taxed as a business.
Inside vs outside IR35
A contract is "inside IR35" when the engagement looks like employment, so employment taxes apply. It is "outside IR35" when the contractor is genuinely in business on their own account. The determination is made per engagement, based on control, substitution, and mutuality of obligation.
Who is responsible for IR35
Since the off-payroll reforms, the responsibility for the status determination sits with the hiring organisation in most cases, not the contractor. Get it wrong and the liability, including unpaid tax and penalties, can fall on the business.
Key takeaway: IR35 moved the risk onto the hirer. A guess is not good enough; the determination has to be made and defended per engagement.
How to stay IR35 compliant
- Assess each engagement. Do not apply a blanket status across all contractors.
- Document the determination. Keep the reasoning and evidence.
- Reassess on change. Revisit if the working arrangement shifts.
- Back it with expertise. Use a partner that makes and stands behind the call.
Best practice: Make the IR35 determination at engagement, market-aware and documented. Worksome makes the status determination and stands behind it.
Frequently asked questions about IR35
Who decides IR35 status? In most cases the hiring organisation, following the off-payroll reforms, rather than the contractor.
What happens if you get IR35 wrong? Unpaid tax and penalties, which can fall on the hiring organisation. HMRC enforces it.
Does IR35 apply outside the UK? No. IR35 is UK legislation. Other countries have their own classification rules.
Managing IR35 across your contractors
IR35 is an engagement-by-engagement decision with real liability attached. Worksome makes and documents that determination as part of onboarding UK contractors.
This page is general information, not legal advice. Tax rules change over time. Confirm your specific situation with qualified counsel. This entry uses UK English.
Related: Worker classification, Misclassification, Independent contractor (IC), Agent of Record (AOR).