IR35 for an employee or a self-employed contractor for tax purposes in the UK

IR35 is a set of rules in the UK that determine whether an individual is considered an employee or a self-employed contractor for tax purposes. This determination is important because it affects how much tax an individual owes and their entitlement to certain benefits.

There are six key rules that are used to determine an individual’s IR35 status. These are:

1. Control: The extent to which the individual has control over how the work is carried out. An employee is typically subject to a higher level of control than a self-employed contractor.
2. Substitution: The ability of the individual to provide a substitute to perform the work in their place. A self-employed contractor is typically able to provide a substitute, while an employee cannot.
3. Mutuality of obligation: The existence of an obligation on the part of the hirer to provide work, and on the part of the individual to accept it. This is typically present in an employment relationship but not in a self-employed contract.
4. Financial risk: The extent to which the individual bears the financial risk for any losses arising from the work. A self-employed contractor typically bears a higher level of financial risk than an employee.
5. Integration: The degree to which the individual is integrated into the hirer’s business. An employee is typically more integrated into the business than a self-employed contractor.
6. Part and parcel: The extent to which the individual is considered to be part and parcel of the hirer’s organisation. An employee is typically considered to be more closely connected to the organisation than a self-employed contractor.

These six rules are used together to determine an individual’s IR35 status. No single rule is determinative, and the final decision will depend on the specific facts and circumstances of the individual’s work.

It’s important to note that the determination of IR35 status can be complex and can vary depending on the individual’s specific situation. If you are unsure of your IR35 status, it is recommended that you seek the advice of a professional.

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