Outside IR35: what the position rests on, and how to stay there

How to be outside IR35: what the position rests on

1. Control: who decides how the work is done. An outside engagement leaves the how, and usually the when and where, with you as the supplier. A client who directs your working pattern the way it directs its employees, supervises your method and moves you between tasks at will is describing employment, whatever the contract says about your independence.
2. Personal service and substitution. A business can send a competent substitute; an employee cannot. A genuine, unfettered right of substitution that the client would honour in practice is one of the strongest indicators of an outside position, and a right hedged with approval clauses the client would never grant is one of the weakest.
3. Mutuality of obligation. Employment carries an obligation on the client to provide work and on the worker to accept it. An outside engagement is for a defined piece of work: it ends when the work does, there is no expectation of a next assignment, and you carry the risk of unpaid time between contracts.
4. The other business badges. Your own equipment, your own insurance, several clients rather than one, quoting for work, correcting your own defects at your own cost, and the ability to profit from doing the job efficiently. None is decisive on its own; together they describe somebody in business on their own account.
5. Keep the evidence while the engagement runs. An outside position is proved by how the work happened, so keep the statement and reasons, the contract, the correspondence that shows you set your own method, any substitution discussion, and the record of other clients. It is far easier to assemble contemporaneously than years later.
6. Then the take-home is a company question. Once the fee is paid gross, what you keep depends on the salary and dividend split, pension contributions from the company, and the costs the company genuinely bears. The outside calculator on this site works that through on the rates in the current tax year rather than a rule of thumb.

Common questions

How do I know if my contract is outside IR35?

The contract is evidence, not the answer. Read control, substitution and mutuality of obligation against how the engagement is actually worked, and get the client's determination and reasons in writing. Where the client is medium or large, the determination is theirs to make.

Can I ask a client to make an engagement outside IR35?

You can discuss how the engagement is structured, and structure genuinely matters: a defined deliverable, your own method, a real substitution right. What you cannot do is ask for a label that the working arrangement will not support, because it is the arrangement HMRC examines.

Is an outside determination permanent, or does working outside IR35 have to be re-earned?

No. It applies to that engagement as described, and GOV.UK notes HMRC stands by a CEST result only while the information given remains accurate. A changed role, an extension into different work or a new line manager can change the position, and a fresh determination is owed.

What do I keep from outside IR35 contracts?

Your company is paid gross and pays corporation tax on its profit; you draw salary and dividends and can make company pension contributions. On the same headline rate that usually leaves more than an inside engagement, at the price of running a company and carrying the risk.

Take-home pay by jurisdiction

• Take-home pay in United Kingdom