What is an IR35 assessment?
An IR35 assessment is a check into how you actually work with a client, used to decide whether you should be taxed as employed or self-employed for that particular piece of work. The formal name for the rules is off-payroll working, but almost everyone still calls them IR35.
If you provide your services through a limited company, sometimes called a personal service company, an IR35 assessment looks past your contract’s wording and asks a more direct question: if you were not going through your company at all, would you simply be an employee of your client? The answer decides how your fees for that contract are taxed.
Source: Understanding off-payroll working (IR35) (GOV.UK)
What does an IR35 assessment actually look at?
An assessment is not just a read-through of your contract. It weighs up your real working practices against what the paperwork says, because HMRC cares about what happens day to day. The main things it considers are:
- Control: who decides how, when and where the work gets done. The more your client directs your day-to-day methods, the more it looks like employment.
- Substitution: whether you could send a suitably qualified replacement to do the work instead of you, and whether the client would genuinely accept that.
- Mutuality of obligation: whether there is an ongoing expectation that your client will keep offering work and you will keep accepting it, rather than each contract standing on its own.
- Personal service: if the contract effectively requires you, and only you, to do the work, that points towards employment.
- Integration: whether you are woven into the client’s team, using their systems and attending their internal meetings, rather than operating as a separate business supplying a service.
There is one clear exception worth knowing. If you hold an office, for example a company director role such as CEO, CFO or CTO, that position cannot usually be held through a limited company in the same way a contract role can. Office holder roles are automatically treated as inside IR35.
Who is responsible for carrying out my IR35 assessment?
This depends on the size of the client you are contracting with, not on you or your own company.
If your client is a medium or large organisation in the public sector, private sector or voluntary sector, your client is responsible for carrying out the IR35 assessment. A private or voluntary sector organisation counts as medium or large if it meets at least two of these conditions: annual turnover of more than £10.2 million, a balance sheet total of more than £5.1 million, or more than 50 employees. All public sector bodies must apply the rules regardless of size.
If your client is a small organisation outside the public sector, meeting none, or only one, of those conditions, your own limited company stays responsible for deciding your IR35 status. You can ask a client to confirm its size if you are not sure, and it must tell you.
Source: Off-payroll working for clients (GOV.UK)
How is an IR35 assessment carried out?
Whoever is responsible for the assessment, whether that is your client or your own company, tends to follow the same broad steps.
- Gather the facts. This means reading the written contract alongside a realistic account of how the work happens in practice, including control, substitution and how embedded you are in the client’s business.
- Check employment status for tax. HMRC provides a free online tool called Check Employment Status for Tax, or CEST, which asks a set of questions about the engagement and gives HMRC’s view of the outcome. It is not compulsory to use it, but HMRC will stand by the result as long as the answers given are accurate and reflect how the work actually happens.
- Reach a decision. The assessing party decides whether the engagement sits inside or outside IR35, based on the evidence gathered.
Source: Check employment status for tax (CEST) (GOV.UK)
What is a Status Determination Statement?
Where your client is responsible for the assessment, they must set out the decision in a Status Determination Statement, usually shortened to SDS. This must give the conclusion reached and the reasons behind it, and it must be passed both to you and to whoever your client contracts with directly, such as an agency.
Your client must take reasonable care when reaching the decision. If they fail to provide an SDS with proper reasons, responsibility for your Income Tax and National Insurance shifts to them until they do, which is one reason clients tend to take this step seriously.
Source: Off-payroll working for clients (GOV.UK)
What if I disagree with the IR35 determination?
You can challenge a determination you think is wrong at any point up until the final payment is made for the engagement. Your client must consider your reasons, decide whether to keep or change the determination, and respond to you within 45 days. If they miss that deadline, responsibility for your Income Tax and National Insurance contributions passes to them until they do respond.
Source: Off-payroll working for clients (GOV.UK)
A worked example
Say Priya runs a limited company and takes on a six-month contract building a website for a large retail client. She sets her own hours, uses her own laptop and project management tools, and has previously sent a fellow developer from her company to cover a fortnight when she was unwell, which the client accepted without objection. Her client is a large organisation, so it carries out the IR35 assessment and, based on the control Priya holds and the genuine right of substitution, issues an SDS confirming the engagement sits outside IR35. This example is illustrative only. Every assessment turns on its own facts, and it is not a guarantee of any particular tax outcome.
Why does the result of an IR35 assessment matter?
The outcome changes how your income from that contract is taxed. If the engagement is inside IR35, the party paying your company, known as the deemed employer, must deduct Income Tax and employee National Insurance before paying your company, and must also account for employer National Insurance and the Apprenticeship Levy where it applies. You may still need to file a Self Assessment return, but relief is available for tax already deducted at source.
If the engagement is outside IR35, your limited company receives fees in full and manages its own tax through the usual salary and dividend structure. Either way, the assessment is not just a form to file. It shapes how much of your income reaches you, and how your business needs to be run to support that position.
Source: Understanding off-payroll working (IR35) (GOV.UK)
Frequently asked questions
Does one IR35 assessment cover all my contracts?
No. The rules apply on a contract-by-contract basis. You could be outside IR35 on one engagement and inside IR35 on another, even with similar clients, because working practices differ between contracts.
What happens if my client will not confirm whether they count as small or large?
You have the right to ask a client to confirm its size, and it must respond. If working practices or the contract change partway through an engagement, the assessment should be revisited too.
Can I use the CEST tool myself, even if my client is responsible for the assessment?
Yes. Anyone in the contractual chain can use CEST, including you as the worker, though the legal responsibility for the final determination still sits with whichever party the size rules point to.
Does IR35 apply if my client is based entirely overseas?
If your client has no UK presence at all, meaning no UK residence and no permanent establishment here, the off-payroll rules do not apply to them, and your own company keeps responsibility for the assessment.
Can I work on both inside and outside IR35 contracts at the same time?
Yes. Many contractors hold a mix, since status is decided per engagement rather than for the person as a whole. Keeping clear, separate records for each contract makes it much easier to support the position taken on each one.
How SuperFiler can help
An IR35 assessment can feel like a lot to get right on top of running your contracting business, and getting it wrong carries real cost either way. SuperFiler can help you approach it with confidence.
- Reviewing your contracts and working practices against the control, substitution and mutuality tests before you sign anything.
- Helping you prepare for or challenge a Status Determination Statement, including gathering the evidence a disagreement needs.
- Structuring your limited company’s salary and dividends efficiently, whichever way an assessment lands.
- Keeping your records in order across multiple contracts, so each engagement’s IR35 position is easy to evidence if HMRC ever asks.
If you would like a second opinion on an upcoming IR35 assessment or help responding to one you have already received, get in touch with SuperFiler and we will talk it through with you.
Important note: This article provides general information. Tax treatment depends on individual circumstances. Current HMRC guidance should be checked before action is taken.
