The IR35 Employment Test

The IR35 Employment Test

For income to be classed as non-IR35 income, you need to be genuinely self-employed. However, there is no statutory definition of ‘employment’ and the following is offered only as a guideline.

If you can answer ‘yes’ to most of the following questions, you are probably employed and therefore subject to IR35:

  • Do you yourself have to work rather than hire someone else to do it for you?
  • Can someone tell you at any time what to do or when and how to do it?
  • Are you paid by the hour/day/week/month?
  • Can you get overtime pay?
  • Do you work set hours, or a given number of hours a week or month?
  • Do you work at the premises of the person you work for, or at a place or places he or she decides?

If you can answer ‘yes’ to most of the following questions, it will usually mean you are self employed and therefore not subject to IR35:

  • Do you have the final say in how the business is run?
  • Do you risk your own money in the business?
  • Are you responsible for meeting the losses as well as taking the profits?
  • Do you provide the main items of equipment you need to do your job?
  • Are you free to hire other people on your own terms to do the work you have taken on?
  • Do you pay them out of your own income?
  • Do you have to correct unsatisfactory work in your own time and at your own expense?

Many workers will be able to answer ‘yes’ to questions in both sections. However, in addition to the above questions, HMRC will look at the degree of control you exercise and the basis on which you are paid and whether you can use substitute to do your work as well as the wording of contracts, and no doubt other factors, to determine your status. It has emphasised that in assessing your work it will take into account all the factors and will not rely on satisfying one aspect; for example, the wording of the contract.

An interim management assignment, almost by definition, will probably be regulated by IR35, whereas a consultancy assignment will probably not be. It may be that some assignments come within IR35 and other assignments do not, in which case you will have two pools of money and you will have to apply the rules to one pool and not to the other.

For each of your contracts, we recommend that you obtain an independent review to establish its IR35 status.