Understanding IR35 in 2025

First introduced 25 years ago, the Intermediaries Legislation (better known as IR35) has undergone some changes in that time, but it remains a source of confusion for many contractors. With that being the case, we thought it would be worth putting together an overview of the legislation as it stands today, who it affects, and what it does, from a contractor perspective; in short, a guide to IR35 in 2025.

Why Might IR35 Apply to Me?

As a contractor, you’ve probably already seen how widely varied contract work can be. The majority of contract work takes place ‘outside IR35’ (especially when operating through a Personal Service Company (PSC)); however your role may be considered ‘inside IR35’ if your terms of engagement would be very similar as a full employee of the client. If so, they will be considered your ‘deemed employer’ for tax purposes.

Is My Role Inside IR35?

Individual contracts vary so much that we cannot specifically tell you whether your contract is sure to be considered inside or outside IR35 without seeing it. We do offer IR35 advice and reviews for contractors, however, and we would be happy to help you understand a given contract and its fiscal and tax ramifications if asked. You may also consider asking your end client, as they are the ones who make the IR35 decision. The three key indicators of a ‘disguised employee’ role are Control, Mutuality of Obligations, and the Right of Substitution.

Control

This looks at how much control the contractor has over how they do the work. If your work must be done within fixed hours at specific locations and/or you’re placed under a direct supervisor with authority over how you do the work, not just the results you should achieve, you are less likely to be considered independent. If you wear a company uniform to do the work and must attend training that the client is providing, these can also be factors.

Mutuality of Obligations (MOO)

Under MOO, the client is obliged to provide you with work to do which you are obliged to do (as opposed to the work you are expected to do being specifically laid out in the contract). This obviously looks more like an ongoing role.

Right of Substitution

A contractor typically has the right to subcontract the contracted service. If this right is absent and you are required to do the work yourself, the role looks more like a disguised employee situation.

Other Factors

Other factors that may apply include:

• Intentions of both parties involved
• Length of the contract
• Exclusivity of work (f you have contracts with several clients at once, this is a strong argument that you could be considered self-employed)
• Whether or not your pay structure includes paid holidays
• Any other benefits on the contract

What Happens if My Contract is Inside IR35?

If your contract is found to be within IR35, HMRC will not consider you as self-employed for tax purposes. Instead, you will be subject to PAYE and will have to pay National Insurance Contributions. However, you may be entitled to claim certain expenses for the client. At ICS, we’re happy to support you in setting up and maintaining compliant documentation whether you are working via Umbrella, a PSC and whether you are inside or outside of IR35. We’ve even put together a free guide to give you a clearer picture. Whether you are working inside or outside of IR35, ICS have the solution for you!

I Still Have Other Questions, Can You Help?

Absolutely! Get in touch and we can set up a time to talk through anything you need to know, including all the questions that are outside the scope of this article.