IR35 for contractors trading through a limited company

Public sector clients and medium or large private sector clients determine status themselves and must give you a Status Determination Statement with reasons, along with a disagreement process.

Where the client is a small company — broadly meeting two of: turnover not more than £15m, balance sheet total not more than £7.5m, not more than 50 employees — the responsibility stays with your own company.

Personal service and the reality of any substitution right, control over how, when and where the work is done, and mutuality of obligation. Around those sit financial risk, provision of equipment, integration into the client's organisation and whether you are in business on your own account.

The written contract matters, but HMRC and the tribunals look at the actual working arrangements. A substitution clause nobody would ever allow in practice carries little weight.

Where the client operates the rules, the fee payer deducts PAYE and employee National Insurance from the fee and pays employer National Insurance on top, usually reducing the rate you actually receive. The net sum arrives in the company and can be drawn without further tax.

Where your own company is responsible and the engagement is inside, the company calculates a deemed employment payment at the year end and operates PAYE on it, with a 5% allowance for expenses in those cases where it still applies.

Keep the signed contract, the Status Determination Statement, any CEST output, a note of how the work is actually performed, evidence of other clients, your own equipment, and correspondence showing you control your working pattern.

Consider status insurance for the cost of an enquiry. Reviews are cheap compared with a retrospective determination across several years.

Rates, thresholds and deadlines quoted here reflect the 2026/27 UK tax year. Check current GOV.UK guidance, or ask us, before relying on them for your own company.