IR35 is one of the most important tax rules affecting contractors and businesses in the UK. It determines whether a contractor is genuinely self-employed or effectively working as an employee for tax purposes. If you fall inside IR35, you must pay income tax and National Insurance like an employee. If you are outside IR35, you can operate tax-efficiently through a limited company.

But how do you know where you stand?

This is where check IR35 status indicators become crucial. HMRC looks at key factors in your working relationship to decide your IR35 position. Understanding these indicators helps contractors, clients, agencies, and payroll providers stay compliant and avoid penalties.

In this in-depth guide, we will explore the top IR35 status indicators, explain how HMRC interprets them, and show how expert support from specialists like The Infinity Group can help you make accurate assessments.

What is IR35 and Why Does It Matter?

IR35 (off-payroll working rules) was introduced to stop “disguised employment,” where people work like employees but avoid taxes by using a limited company.

Why IR35 matters:

  • It affects tax and National Insurance.
  • It impacts your take-home pay.
  • It can lead to HMRC investigations and penalties.
  • It influences your contract structure and working practices.

Since the IR35 reform in April 2021, medium and large private sector clients are now responsible for determining IR35 status. Contractors must understand the indicators to protect themselves and challenge incorrect decisions if necessary.

The Three Core IR35 Status Tests

HMRC primarily considers the following three tests when determining IR35 status:

  1. Control
  2. Substitution
  3. Mutuality of Obligation (MOO)

If these tests point towards employment rather than genuine contracting, you are likely inside IR35.

Let’s explore each test and its indicators in detail.

1. CONTROL: Who Decides How Work Is Done?

Control refers to how much freedom the contractor has in performing their work. HMRC looks at whether the client controls the contractor like an employee.

Indicators You Are Inside IR35

  • The client tells you when, where, and how to work.
  • You follow internal company policies like employees.
  • You must work fixed hours.
  • You need approval for time off.
  • You have a manager or supervisor overseeing your tasks.

Indicators You Are Outside IR35

  • You choose how to complete the work.
  • You have flexibility in when and where you work.
  • You work towards project-based deliverables rather than hours.
  • There is no day-to-day supervision.

Key tip: The more freedom and autonomy you have, the more likely you are outside IR35.

2. SUBSTITUTION: Can You Send Someone Else to Do the Work?

A true contractor should be able to provide a substitute to complete the job. This is a strong indicator of being outside IR35.

Indicators You Are Inside IR35

  • The client insists only you can do the work.
  • You cannot send anyone else.
  • The contract bans substitution.
  • The client must approve substitutes but is unlikely to accept any.

Indicators You Are Outside IR35

  • You have a genuine right of substitution.
  • You have previously provided a substitute or could realistically do so.
  • The client cares about the result, not who delivers it.
  • The contract clearly states your substitution rights.

Important: HMRC values actual working practice over written contracts. If substitution is allowed in writing but impossible in reality, it may not protect you.

3. MUTUALITY OF OBLIGATION (MOO): Is There a Long-Term Expectation of Work?

Mutuality of obligation means both parties are obligated to each other:

  • The client must offer ongoing work.
  • The contractor must accept it.

This is typical of employment, not contracting.

Indicators You Are Inside IR35

  • The client continuously provides work beyond the project.
  • You are expected to remain available.
  • You work in an ongoing role (e.g., covering staff shortages).
  • Notice periods apply like employees.

Indicators You Are Outside IR35

  • You are hired for a specific project or task.
  • Once complete, the relationship ends.
  • You are free to accept or decline additional work.
  • No obligation to work regular hours.

If your engagement looks permanent or ongoing, HMRC may classify it as employment.

Additional IR35 Status Indicators

While the three core tests are the most important, there are several other factors HMRC considers.

4. Financial Risk

Employees do not take financial risks. Contractors often do.

Inside IR35 Indicators:

  • You are guaranteed payment regardless of results.
  • The client covers business expenses.
  • No risk of loss.

Outside IR35 Indicators:

  • You may lose money if work is late or incorrect.
  • You provide your own insurance or equipment.
  • You operate like a business, not an employee.

5. Provision of Equipment

Inside IR35:

  • Client provides tools, laptop, software, PPE, desk, etc.

Outside IR35:

  • You use your own equipment.
  • You maintain and insure your tools.

6. Integration into the Business

Inside IR35:

  • You are part of the team.
  • You attend staff meetings, training, or appraisals.
  • You have a company email or internal title.

Outside IR35:

  • You are treated as an external supplier.
  • You are engaged for specific outcomes.
  • You remain independent.

7. Ability to Work for Other Clients

Inside IR35:

  • You must work exclusively for one company.
  • You need permission to take on other work.

Outside IR35:

  • You can work with multiple clients simultaneously.
  • You manage your own workload.

8. Project-Based vs Ongoing Work

Inside IR35:

  • No clear end date.
  • Role-based rather than outcome-based.

Outside IR35:

  • Fixed-term contract.
  • Clear deliverables.
  • Defined scope of work.

Why Written Contracts Aren’t Enough

Many contractors believe that if their contract says they are self-employed, they are safe. However, HMRC looks at actual working practices, not just the contract.

Even if a contract includes clauses about substitution or autonomy, if your daily work resembles employment, you may still be inside IR35.

Action: Make sure your actual working practices reflect the terms of your contract.

Can the HMRC CEST Tool Help?

HMRC provides the CEST (Check Employment Status for Tax) tool to help determine IR35 status.

However, it has limitations:

  • Often ignores Mutuality of Obligation.
  • Relies on user interpretations.
  • Does not cover all scenarios.
  • Has delivered incorrect results in the past.

Many contractors and clients use CEST as a starting point but seek professional advice for accuracy.

Consequences of Getting IR35 Status Wrong

If HMRC determines you are inside IR35 when you claimed to be outside:

  • You could owe years of back taxes.
  • You may face penalties and interest.
  • Clients may stop working with you.
  • Your reputation could be damaged.
  • You could be investigated further.

For businesses, incorrect IR35 assessments can lead to significant financial liabilities and HMRC audits.

How to Protect Yourself

To stay on the right side of IR35:

Review contracts carefully
Align contracts with actual working practices
Avoid behaving like an employee
Keep records of deliverables, substitutions, and client independence
Work with multiple clients where possible
Seek professional IR35 assessments

How The Infinity Group Helps Contractors and Businesses with IR35

The Infinity Group is a specialist payroll and compliance provider with deep expertise in IR35, CIS, and contractor payroll services. They work with both contractors and businesses to ensure correct IR35 status and full compliance with HMRC.

Services Offered by The Infinity Group:

  • IR35 status reviews and assessments
  • Contract analysis and guidance
  • Alignment of working practices with contracts
  • Payroll for both inside and outside IR35 workers
  • Umbrella and CIS solutions
  • HMRC-compliant documentation and records
  • Ongoing legislative updates and support

By combining legal, payroll, and industry expertise, The Infinity Group ensures that both contractors and clients are protected from penalties and can work with confidence.

Final Thoughts

Understanding IR35 status indicators is essential for any contractor or business in the UK. HMRC does not rely on a single factor—rather, it considers the overall working relationship.

To determine whether you are inside or outside IR35, focus on the key indicators:

Control • Substitution • Mutuality of Obligation
Financial risk • Equipment • Integration • Flexibility • Project-based work

The more your role resembles genuine self-employment, the stronger your case for being outside IR35.

Because IR35 is complex and mistakes are costly, many contractors and businesses rely on professional guidance. The Infinity Group provides expert IR35 support, helping you assess status accurately, structure contracts correctly, and stay fully compliant.