Payroll & employment
IR35 tests whether you would be an employee without your company. Who decides status, what a deemed payment costs and how to protect your position.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityIR35 applies where you would be an employee of the client if your company did not exist. For public sector and medium or large private sector clients, the client decides status. For small private sector clients, your company decides and bears the risk.
The status tests
The cost of being inside
IR35 applies where you would be an employee of the client if your company did not exist. For public sector and medium or large private sector clients, the client decides status. For small private sector clients, your company decides and bears the risk.
Three main factors decide it: personal service and whether a genuine right of substitution exists, control over how, when and where you work, and mutuality of obligation. Financial risk, providing your own equipment, working for multiple clients and being outside the client's organisation all support outside-IR35 status.
The written contract matters less than the working reality. HMRC looks at what actually happens, so a substitution clause never used, in a role indistinguishable from an employee's, is weak evidence.
Inside IR35 with a small client, your company calculates a deemed employment payment at the year end, subjecting almost all the fee income to PAYE and NIC after a 5% allowance and pension contributions. The tax result is close to employment with none of the employment rights.
Where the client determines status, they must issue a Status Determination Statement with reasons and operate a disagreement process. Keep the statement, the contract and notes on the actual working practices for each engagement.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK position and current Companies House and HMRC guidance. Check GOV.UK, or ask us, before relying on them for your own company.
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Frequently asked
One meeting two of three tests on turnover, balance sheet total and employees, as defined for the off-payroll rules. Small clients leave the decision with your company.
HMRC says it will stand by a CEST result where inputs are accurate, but it returns undetermined often and is not a substitute for a contract review.
Yes. Status is assessed contract by contract.
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
No. This page explains general UK rules and common accounting treatment. Your facts, contracts and wider tax position must be reviewed before you rely on a conclusion.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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