IR35 Status Calculator

Use this indicator to assess whether a UK contracting engagement is likely inside or outside IR35. Essential for limited company contractors, hiring companies, and recruiters needing a quick status check before formal CEST or HMRC review.

What this indicator does

The IR35 status indicator helps you assess whether a contracting engagement is likely to fall inside or outside IR35 based on the key status tests used by HMRC.

It uses:

• substitution rights
• control over how, when, and where work is performed
• mutuality of obligation
• financial risk and equipment provision

This gives you an indicative status — inside IR35 (employed for tax) or outside IR35 (genuinely self-employed) — to inform contract structuring, rate negotiation, and the decision to commission a formal CEST assessment or specialist review.

IR35 Status Factors

Outside IR35 indicators outweigh inside IR35 indicators → likely outside

Key factors assessed:

• Substitution = right to send a substitute to perform the work
• Control = degree of client control over working method, hours, and location
• Mutuality of Obligation = ongoing requirement to offer and accept work
• Financial Risk = exposure to financial loss, own equipment, own insurance
• Integration = degree to which the contractor operates as part of the client's team

Example assessment

If:

• Genuine right of substitution = yes
• Client controls working hours and location = no — contractor decides
• Obligation to accept further work after current project = no
• Provides own equipment and carries professional indemnity insurance = yes

Then:

• All four major tests favour outside IR35
• The engagement is likely outside IR35 based on these indicators
• A formal CEST assessment or specialist contract review is still recommended before relying on this status

What is IR35?

IR35 is UK tax legislation that targets disguised employment — arrangements where a worker provides services through an intermediary (typically a limited company) but works under conditions effectively the same as employment. If a contract is inside IR35, the worker pays income tax and National Insurance on the engagement as though they were a direct employee. If outside IR35, the contractor pays tax through their limited company at lower effective rates.

Why IR35 status matters

Determining IR35 status correctly helps you:

• pay the correct amount of UK tax and National Insurance for the engagement
• avoid HMRC penalties and back-tax demands from incorrect status determinations
• structure contracts and working practices to genuinely reflect outside IR35 status
• negotiate appropriate day rates that reflect the tax treatment of the engagement

When to use this indicator

Use this indicator when you want to:

• quickly assess a contracting engagement before signing a contract
• review existing engagements for IR35 risk exposure
• prepare for a formal HMRC CEST assessment or specialist review
• compare the tax impact of inside versus outside IR35 status on a day rate

Common mistakes when assessing IR35

Common mistakes include:

• relying on the contract wording alone — HMRC assesses actual working practices, not just paper terms
• treating "right of substitution" as automatic outside IR35 status — the right must be genuine and unrestricted
• ignoring mutuality of obligation — ongoing rolling contracts can indicate inside IR35 even where other factors favour outside
• assuming a previous outside IR35 determination still applies after material changes to the engagement

Inside IR35 vs outside IR35

The two outcomes have very different tax and operational consequences.

• Inside IR35 — engagement treated as employment for tax purposes. PAYE income tax and National Insurance apply, with the fee payer (client or agency) deducting tax before payment
• Outside IR35 — engagement is genuine business-to-business. The contractor pays tax through their limited company at lower effective rates and retains commercial flexibility

The net take-home difference can be 15% to 25% on the same day rate, depending on income level and expenses claimed.

FAQs

What is IR35?

IR35 is UK tax legislation designed to prevent disguised employment. It applies to workers providing services through an intermediary (usually a limited company) but working under terms that resemble direct employment. Inside IR35 means tax is applied as if the worker were an employee.

How do you determine IR35 status?

IR35 status is determined by reviewing the actual working arrangement against HMRC's key tests — substitution, control, mutuality of obligation, financial risk, and integration. HMRC's CEST tool and specialist IR35 contract reviews are commonly used for formal assessments.

What is a good indicator that a contract is outside IR35?

A genuine right of substitution, contractor control over working method and hours, absence of mutuality of obligation, provision of own equipment, financial risk, and clear separation from the client's employees all point toward outside IR35.

What is the difference between inside and outside IR35?

Inside IR35 treats the engagement as employment for tax purposes — PAYE and NI apply with tax deducted before payment. Outside IR35 treats the engagement as genuine self-employment through a limited company — tax is paid through the company at lower effective rates.