IR35 rules: who they apply to, and who decides your status

Reading the IR35 legislation and the IR35 criteria against your own engagement

1. Identify the end client. GOV.UK defines the client as the person who is or will be receiving the services of the worker, also called the engager, hirer or end client. Where an agency sits in the chain it is not the client, and the determination is not the agency's to make even though the agency often passes it on.
2. Establish the client's size. The guidance sets out different rules for those working for a small business and those working for mid or large-sized businesses. Where the client is medium or large, the client determines status and issues the statement; where it is small, the original rules apply and the intermediary decides and accounts for its own position.
3. Check what your intermediary is. The rules apply where services are provided through the worker's own intermediary, which GOV.UK says is usually a limited company known as a personal service company, but may also be a partnership or another individual. A personal service company is not defined in law: it is a company the worker controls and has an interest in.
4. A sole trader is a different question. If you contract directly as a sole trader with no intermediary, the off-payroll rules are not what decides your treatment: employment status for tax is decided under the ordinary status tests, and the engager can still be liable for getting it wrong. The IR35 label gets attached to that conversation constantly and does not belong to it.
5. Read the determination, not the label. A determination that says only inside or outside is not a determination. The client should give reasons, and those reasons are what you check against control, personal service and the right of substitution as the engagement is actually worked rather than as the contract describes it.

Common questions

How does the IR35 small company exemption work?

Where the CLIENT is small, the responsibility does not shift to the client: the original rules apply and the worker's own intermediary decides its position and accounts for any liability. The size that matters is the end client's, not your own company's.

Do IR35 rules for self-employed sole traders apply at all?

The off-payroll rules are about services provided through an intermediary, so a sole trader contracting directly is outside their scope. Employment status for tax still applies through the ordinary tests, and the engager carries the risk of treating an employee as self-employed.

Who is liable if a determination is wrong?

Where the client is medium or large, the deemed employer in the chain accounts for the tax and National Insurance, and liability can move up the chain to the client where a party fails. Where the client is small, the intermediary carries it.

Does an agency decide my status?

No. The client receiving the services makes the determination and passes it down the chain. An agency that hands you a status without a statement and reasons is relaying somebody else's decision, and you are entitled to see it.

Take-home pay by jurisdiction

• Take-home pay in United Kingdom