What is an IR35 compliance check?

HMRC's check focuses on the reality of how a contractor works, not just what the contract says on paper. It looks at whether the individual has a genuine right of substitution, how much control the client exercises over how, when and where the work is done, and whether there is mutuality of obligation beyond the specific assignment.

HMRC typically requests the written contract, but also asks questions of both the contractor and the end client about actual working practices — who supervises the work day to day, whether the contractor can turn down further work, and whether they bear meaningful financial risk such as correcting errors at their own cost.

Since the off-payroll working reforms, the check may be directed at the end client rather than the contractor's company where Chapter 10 ITEPA 2003 applies, since medium and large clients are responsible for making the status determination and, in many cases, for operating PAYE if the engagement is inside IR35.

For engagements with small private sector clients, the original IR35 rules in Chapter 8 Part 2 Income Tax (Earnings and Pensions) Act 2003 (opens in a new tab) require the contractor's own company to assess status and account for any additional tax due if the engagement is inside IR35.

For engagements with medium or large clients (and all public sector clients), Chapter 10 of the same Act shifts responsibility for the status determination, and usually the PAYE obligation, to the end client or the fee-payer in the labour supply chain.

HMRC's published Check Employment Status for Tax tool gives an indicative view but is not legally binding; HMRC's own compliance checks apply the full case law tests built up over decades of IR35 tribunal decisions.

If you operate through a personal service company, keep a clear record of how each engagement actually worked in practice, not just the written contract, since this is what HMRC will focus on if it opens a check.

If you are the end client or fee-payer, make sure status determinations are documented with reasons, not just a tick-box outcome, and that you have a process for contractors to disagree and have the determination reviewed.

Review status regularly where working arrangements change over time, since a determination made at the start of an engagement can become inaccurate if the reality of how someone works shifts.

Where HMRC concludes an engagement was inside IR35 but was not treated as such, the tax and National Insurance due on the deemed employment income, plus interest, can be substantial, particularly if it covers several tax years.

Penalties can apply on top where reasonable care was not taken in reaching or applying the status determination.

Defending a status position properly, gathering witness evidence on working practices and presenting the case, needs specialist support. Growth plan clients have free tax investigation insurance included to cover this — see /fees.

Do not rely solely on contract wording that describes a right of substitution or lack of control if the actual working practice contradicts it.

Do not skip documenting the reasoning behind a status determination; a bare conclusion with no rationale is far weaker if challenged.

Do not assume a determination made years ago still holds if the way the contractor actually works has changed since.