IR35 Status Determination

The employment tests used to decide inside/outside IR35, what an SDS must contain, and how to challenge a wrong decision.

Last updated: April 2026

How IR35 Status Is Determined

There is no single test for IR35. Status is determined by looking at the overall picture of the working relationship — particularly how it compares to employment. Courts and tribunals have developed a body of case law identifying the key factors; HMRC's CEST tool attempts to codify these into a structured assessment.

The three most significant factors are substitution, control, and mutuality of obligation. If all three point clearly outside IR35, the engagement is very likely outside. If all three point inside, it is very likely caught.

The Key Employment Tests

Substitution

High weight
Inside IR35: You must personally provide the service — no substitute permitted
Outside IR35: You have a genuine, unconditional right to send a qualified substitute

Control

High weight
Inside IR35: Client controls how, when, and where you work (like an employee)
Outside IR35: You decide how to achieve the deliverable; client controls only what outcome is required

Mutuality of Obligation

High weight
Inside IR35: Client expects ongoing work; you expect to be offered more — like an employment relationship
Outside IR35: Engagement is project/deliverable-based with no expectation of continuation

Equipment / Tools

Medium weight
Inside IR35: Client provides all equipment and tools
Outside IR35: You use your own equipment and tools

Financial Risk

Medium weight
Inside IR35: No financial risk — paid regardless of outcome
Outside IR35: You bear financial risk (e.g., must fix errors at own cost, can profit/lose on the engagement)

Integration

Medium weight
Inside IR35: Part of the client's team — on org chart, attends all staff meetings, uses client email
Outside IR35: Clearly distinct from permanent staff — separate workspace, external identity

What a Status Determination Statement Must Include

Under the off-payroll working rules, a medium/large engager must provide each contractor with a written SDS that includes:

  • The determination — inside or outside IR35
  • The reasons for the determination (not just the conclusion)
  • The determination must be passed down the supply chain (e.g., to the agency)

If an SDS is issued without reasons, it is not a valid SDS — the liability remains with the engager.

Read about the off-payroll working rules →

See how inside IR35 affects take-home pay →

HMRC CEST tool — Check Employment Status for Tax

IR35 Guides

IR35 ExplainedOff-Payroll Working RulesIR35 Take-Home Pay ImpactInside IR35: Umbrella or PAYE?

Frequently Asked Questions