Feefo Gold Merchant

IR35 Advice Centre


IR35 Compliance Guide

IR35 Compliance Guide
Contact Qdos Contractor:0116 269 0999

IR35 Guidance


IR35 Compliance for Contractors

Despite changes to the administration of IR35 from April 2021, the way in which it is determined remains the same.

Below we explain the main status tests that need to be considered to assess IR35, how to comply with the legislation and why. (Please note that this is only a brief guide; it is not intended to be a comprehensive analysis of employment status).

If you have any queries regarding IR35 or the below IR35 compliance guide, please do not hesitate to contact our consultancy department on 0116 2690 992 or [email protected]


Who is responsible for IR35 compliance?


The party responsible for IR35 compliance depends on when and with who you are contracting. Since 2000 when the legislation was introduced, it was the sole responsibility of the contractor, however, due to IR35 reform in both 2017 and 2021, this is not always the case.

The responsibility for IR35 lies with the contractor if:

  • you are providing services to a client in the private sector which is classed as a small company under the Companies Act 2006

The responsibility for IR35 lies with the end client/fee-payer if:

  • you are providing services to a client in the public sector
  • you are providing services to a client in the private sector which is classed as a medium or large company under the Companies Act 2006 from 6th April 2021

The off-payroll working rules, introduced in the public sector in 2017 and to the private sector in 2021, mean that it is the end client’s responsibility to determine IR35 status. It will also be the fee-payer's responsibility to deduct the relevant tax and National Insurance from source where you are determined as 'inside IR35'. For the private sector, this applies only to medium-large clients.

Every member of the contractual chain inbetween is responsible for ensuring they contribute to the compliance of an engagement by passing the status determination statement along the chain.

Read more about IR35 changes in the private sector.

IR35 Status


The key factors which determine your IR35 status


It is important to note that each working arrangement is reviewed on its own merits and all of the positive and negative elements of both the written contract and working practices will be weighed up in line with case law in order to provide a balanced opinion.​

When considering overall IR35 compliance for the entire engagement, it truly is a mixture of different factors, not simply the written terms. You should ensure that any contract proven to be outside of IR35 also matches the working practices of that engagement. So, if the contract says you are expected to provide your own equipment for the services, you should make sure that you are not using any client equipment during the provision of the services. This is because when determining IR35 status, the working practices are seen to hold more weight or are also referred to as the reality of the engagement.

What are the IR35 tests?

  • Office Holders

  • Right of Substitution/Personal Service

  • Control

  • Mutuality of Obligation (MOO)

  • Financial Risk

  • Right of Dismissal

  • Part and Parcel of the Organisation

  • Exclusive Services

  • Intention of the Two Parties




two men discussing with paperwork

IR35 reform repeal – contractor FAQs

IR35 reform will be repealed on 6th April 2023 – but what does it mean for contractors?

Edited 17/10/22: The planned repeal of the off-payroll working rules (IR35 reform) has been cancelled as per an emergency statement issued by Chancellor of the Exchequer, Jeremy Hunt.

The IR35 reform repeal development was initially announced by the Chancellor in the mini-Budget. An announcement which revealed a raft of tax changes – from the scrapping of IR35 reform to the reversal of the recent national insurance and dividend tax increase and much more. 

But without a doubt, the news that IR35 reform will be repealed next year was the major talking point for contractors – and a big unexpected bonus. 

In this article, which will be updated as more information becomes available, we answer the key questions being put to our experts. 

What will change?

The reform – also known as the off-payroll working rules – is set to be abolished in both the public and private sectors on 6th April 2023. 

As a result, contractors will be transferred back the responsibility for assessing their IR35 status, which had become the end-client’s duty after the introduction of reform in the public sector (in 2017) and private sector (in 2021). 

In addition, contractors will be liable for IR35 once more. It means from 6th April 2023, HMRC will investigate contractors for non-compliance, rather than the fee-paying party. 

It should be stressed that nothing will change until this date, with reform remaining in play until then. Liability for the period between when reform was introduced (either 2017 or 2021) and 6th April 2023 will remain with the engager and retrospective enquiries could still be carried out. And until the Finance Bill is passed, the changes are not set in stone.

Is IR35 getting scrapped?

No. The IR35 legislation referring to Chapter 8 Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) has not been scrapped. 

IR35 status must continue to be assessed and the applicable tax paid to HMRC.

Will the IR35 rules change further?

In time, this is a possibility. Kwasi Kwarteng, Chancellor of the Exchequer, said in his mini-Budget statement that "[the government] can also simplify the IR35 rules – and [they] will."

How this will play out, in reality, remains to be seen. Determining IR35 status has always been difficult, with ease of misinterpretation, reliance on previous judge rulings and the holistic manner of coming to a conclusion.

HMRC’s idea of simplifying IR35 guidance thus far, however, has been the failed Business Entity Tests and more recently, the Check Employment Status for Tax (CEST) tool, which has been deemed not fit-for-purpose by numerous experts.

Updating the tests on which status are based – many of which date back several decades – has been put forward several times but this is highly unlikely to happen before April 2023.

Until any further guidance is released, contractors should prepare according to the rules in place prior to the reforms.

Can I use my client’s Status Determination Statement (SDS) as my own due diligence?

It depends. Unlike the rules for agencies and clients under Chapter 10, the requirements for contractors’ due diligence under Chapter 8 of the IR35 legislation have never been clear-cut. 

With the responsibility shift, however, we would suggest the following:

  • Where the IR35 status determination process involved your input, such as with Qdos Status Review, you may be able to use the issued SDS as evidence of IR35 status.
  • However, where you did not provide input to the determination – for example, if your end-client used CEST or another tool – you should seek to undertake your own assessment, demonstrating your own due diligence.

Either way, contractors should look to reassess their IR35 status ahead of 6th April 2023. This stands regardless of any material change in circumstances, including but not limited to, the undertaking of a new role.

If I received an inside IR35 SDS but I believe my contract belongs outside IR35, can it be used against me in an investigation?

If you were assessed by your existing client as ‘inside IR35’ or are working on the payroll, it could prove difficult to evidence that you are in fact outside IR35 with the same end client if there are no material changes to working practices. This is working on the assumption that the status assessment made by the end-client is accurate. 

If you aren’t convinced that your IR35 status is correct, an independent IR35 contract assessment will offer an objective, expert view. 

Due to IR35 reform, my client banned contractors and insisted that I work on the payroll. Are there any risks if I have the opportunity to revert back to contracting outside IR35?

Many organisations bypassed the legislation and determination process entirely by making ‘policy decisions’ not to engage personal service companies or insisting that they work on the payroll irrespective of their true status. Until both your contract and working practices have been rigorously assessed, it would be unwise to revert back to contracting outside IR35 from 6th April 2023.

However, should an expert IR35 status review deem your contract outside IR35 (and assuming that your client is comfortable engaging your services in this way), you can be confident of your compliance.

As things stand, there’s nothing to suggest that you will be at a greater risk of being investigated by HMRC. However, to further mitigate this risk, IR35 insurance can be purchased. 

Can I return to working outside IR35 on 6th April?

If you are operating inside IR35 or on-payroll, in theory, there’s nothing preventing you from returning to working through your limited company. You should, however, consider the following:

1. Your client is not obligated to engage contractors any more than you are obligated to accept working on the payroll. If you intend to remain with the same client and are looking to switch back to your limited company, you should discuss this with them.

2. If you closed your limited company via MVL (Members’ Voluntary Liquidation) within the past few years, there may be tax implications to opening a new company if returning to similar activities. You should discuss this with your accountant.

3. If you were assessed by your existing client as ‘inside IR35’ or are working on payroll, it would be extremely difficult to prove that you are in fact outside IR35 with the same end client if there are no material changes to working practices.

As a public sector contractor, will I need to provide assurance to my client as per the 2012 rules?

At the time of writing, it seems unlikely. Prior to the introduction of IR35 reform in the public sector in 2017, contractors providing services to a public sector body for more than six months or earning in excess of £220 per day were required to provide proof of their status to their end-client.

The assurance rules for the public sector were never legislated. Therefore, we expect that these rules will not be reapplied following the repeal of IR35 reform. Public sector contractors should proceed to determine their own IR35 status and acquire the necessary due diligence.

Am I required to use CEST to determine my IR35 status?

No. HMRC’s CEST tool, which was introduced to help end clients assess their contractors’ status, was not made mandatory. 

It’s therefore highly unlikely that contractors will be obliged to use CEST. It will, however, remain accessible to contractors to use.

There are risks associated with relying on CEST, though. The tool has been deemed largely not fit-for-purpose by many, including the House of Lords. Additionally, public sector bodies such as The Home Office and DWP faced multi-million-pound tax bills for non-compliance under the off-payroll working rules despite relying on the tool. 

With the tool yet to hold up in a tribunal, we wouldn’t recommend relying on CEST for a robust IR35 status assessment. 

How can I assess my IR35 status?

As has always been the case, contractors should review both the written agreement and working practices.

An IR35 contract assessment is a widely trusted method to help determine your status. Having specialised in the legislation since its introduction in 2000, Qdos have carried out over 150,000 expert contract assessments. Incidentally, recent tribunal rulings have placed greater emphasis on the written contracts between the parties, particularly cases involving high profile television and radio personalities. 

For further clarity regarding your IR35 status, a working practices review is also highly  recommended. In the event of an IR35 investigation, HMRC will first inspect the contract, before scrutinising your working practices – these reflect how the service is provided day-in-day-out.

Will Qdos still provide free IR35 contract assessments with insurance policies?

Yes. Qdos have never stopped providing free IR35 contract assessments for contractors when one of our IR35 insurance policies is purchased. We have no intention of stopping the service.

We will, however, look to improve our processes and offering to contractors, which may or may not amend the nature of the free IR35 contract assessment.

Will I require IR35 insurance?

While IR35 insurance is not mandatory, it’s acknowledged as essential cover for contractors. 

Full IR35 insurance offers peace of mind and financial protection, in the event of an HMRC investigation. This cover includes; representation costs relating to defending your case against HMRC (up to £50,000), plus tax and national insurance liability, interest and penalties arising from an IR35 enquiry (up to £250,000).

By:Qdos Contractor

IR35 Guidance


How to comply with the IR35 legislation

When it comes to complying with the IR35 legislation, you should consider the following steps:

  1. Review each engagement for IR35 status. This includes assessing both the written terms but also your working practices (the reality of the engagement) against the key factors above.
  2. Check that your working practices mirror what is detailed within your contract. The reality of the engagement holds more weight than the written terms so it is important to ensure your contract is a true reflection of the engagement.
  3. Keep a record of your due diligence. This could include copies of third-party contract reviews, a Confirmation of Arrangements and/or relevant correspondence which may help evidence your position.
  4. Ensure the relevant tax and national insurance is paid for your status. Being compliant with IR35 is often confused with being 'outside IR35', but compliance really just means paying the correct tax for your employment status. So if you are operating 'inside IR35' for an engagement, then a deemed payment must be made.
  5. Maintain up-to-date assessments of your engagements - ensuring reassessments throughout the engagement or if there are any material changes
  6. Keep an eye on relevant news for any changes or updates to how status is determined

Since April 2021, whilst it might no longer always be the contractor’s responsibility to determine their IR35 status, contractors should still be focusing on ensuring compliance within their engagements.

It is important to remember that the reform does not apply to any engagements with companies classed as small as per the Companies Act 2006 and contractors are still liable for any services provided prior to April 2021. See above for more information on who is responsible for IR35 compliance.



IR35 compliant contracts


An IR35 enquiry from HMRC will always begin with a request for copies of your written contracts relating to the accounting period in question, with proof of why you consider it to be outside of IR35. A robust contract may stop a full-blown investigation in its tracks, so it is essential to ensure compliance in this respect. A variety of status tests, outlined in this guide, are used to assess your contract, with no single test putting you inside or outside the legislation. Both the contract and working practices will require assessment as a whole using all of the status tests to determine your employment status.

​The contract does not need to be in writing - an oral or implied contract is legally binding if the parties intend it. The terms of the contract can be collected from the circumstances surrounding the engagement.

​It is not only your contract with a recruitment agency which may be assessed; in Usetech Ltd v Young the High Court decision made it clear that the "upper level" contract between the agency and the end client was to be considered in deciding the status of the worker, notwithstanding the terms of the agency's contract with the worker's Personal Service Company. Most contractors, however, will never see the upper level contract or have any rights to.

​HMRC will look to see if you have taken ‘reasonable steps’ to ascertain your status and so it is imperative to have each contract reviewed in order to display this. View our contract review services here.

Having your contract reviewed by an independent third-party expert, will give you a better idea of where your engagement sits in regard to IR35 status. While such a review gives you the IR35 status of that contract, however, in order to find out the overall IR35 status of the engagement you will also need to undertake a review of the working practices of that engagement.

Working Practices


The working practices of an engagement is how those services are provided in reality.

The written contract between the contractor and the end client could be perfect in terms of IR35, demonstrating key areas such as substitution, control, non-exclusivity and mutuality of obligation but this will also need to be proven in practice. Although the written contract remains important in determining status, should you be unfortunate enough to be subject to an IR35 enquiry, HMRC will look closely into your working relationship with your client.

​In an ideal world, we would like an IR35 friendly contract mirrored by the working relationship with the client.

If you are subject to a status enquiry by HM Revenue & Customs, the Status Inspector will normally want to obtain information from both you and the end client about the practical working arrangements of each engagement. This is known as constructing the "hypothetical contract" between the worker and the client. It is vital therefore that there is a clear understanding between you and the client about the nature of your day-to-day working relationship. This will also apply to situations where there is no written contract.

​We offer services for assessing your working practices, including a Working Practices Assessment and a free Confirmation of Arrangements document which can both be assessed by our consultancy team.


Why is IR35 compliance important?


Non-compliance with IR35 could leave you with not only the weighty cost of defending yourself against an enquiry from HMRC but also the potential burden of being saddled with the cost of any unpaid taxes should you be caught by the legislation.

Anyone can be investigated by HMRC, and should you be found to be inside IR35 but have paid tax as an outside IR35 contractor, you will be required to pay back the tax, interest and potential penalties as a result.

You should also bear in mind that an enquiry from HMRC is by no means a walk in the park, not only can these proceedings be extremely stress-inducing but they also have the potential to go on for a long time. The cost of defending yourself from an IR35 enquiry can very swiftly mount up if you don't have an insurance policy.

For services provided under the off-payroll working rules (i.e. in the public sector since 6th April 2017, or to a medium-large private sector business since 6th April 2021), you will not hold any liability as the contractor and it will be your client of fee-payer who will be subject to such an investigation in relation to these services.



Top 10 Tips for IR35 compliance


1. Have your engagements assessed for their IR35 status, by doing so you can evidence compliance with the legislation should your engagements ever come into question from HMRC. By opting for a mixed approach of both a contract and working practices review, you will have a clear picture of the reality of your engagement in terms of IR35 status.

2. Educate yourself about what IR35 might mean for your engagements and keep up to date with the legislation. By using the wealth of online articles available to you, you stand a better chance of ensuring compliance in the way you provide your services by simply knowing what could be classed as inside or outside of IR35.

3. Ensure communication within your contractual chain. By doing so, each party will know what they are accountable for. By keeping track of each other and the determination process it will be easier to make any necessary changes to better IR35 status.

4. Take care when checking that your working practices accurately reflect the written contract you have signed. Not only should you be actively monitoring the way you provide the services to ensure you are acting in a way that is compliant with the terms of your contract, but you should also be collecting evidence to prove this is the case.

5. Make sure you are providing services in a manner that is consistent with working outside of IR35 or pay the relevant taxes if not.

6. Collect evidence to show you are treated differently to your client’s employees. Examples of this would be a record of any relevant emails or other forms of contact with your client.

7. Look for contracts that are outside of IR35 at their very base level, in other words, project-based contracts rather than time-based contracts. Always have a good read of the contract before signing. Another example of this is that you should look to see that you are not individually named within the contract and are only referred to as a business.

8. Seek to attain a Confirmation of Arrangements. Having a CoA signed by your end client greatly increases your chances of successfully defending yourself from an IR35 enquiry. For more information on what a CoA is and how to attain one, see here.

9. Show you operate a genuine business and that you are not part in parcel of your end client’s company. Examples of this would be investing in stationery for your business, such as letterhead paper, or simply wearing an ID badge when attending your client’s site.

10. Have proof that you have taken financial risk on behalf of your business. Examples of financial risk would be holding relevant business insurances such as Professional Indemnity Insurance or Public Liability Insurance. Both of which we can provide for you here at Qdos.


Tax & IR35 Cover

From £199.00 Tax Liability Cover (TLC35)

Full IR35 insurance, covering representation costs in dealing with HMRC plus additional tax, NIC, interest and penalties arising from an IR35 enquiry....

From £199.00 Tax Liability Cover (TLC35)
Learn more
Only £99.00 Tax Enquiry Insurance

Covers full representation costs in the event of a range of HMRC enquiries, including PAYE reviews, IR35, Section 660a. You can add Unlimited IR35 Co...

Only £99.00 Tax Enquiry Insurance
Learn more

Need Help?


Call our team on 0116 269 0999
Or arrange a call back

Call back
Chat with us