IR35 gets talked about like it’s some kind of elite-level tax puzzle that only very serious-looking accountants can decode. In reality, it’s simpler than it sounds. Not easy, but it won’t make your head explode trying to understand it either. 

What is an IR35 assessment?

It’s basically HMRC trying to answer one question:

“Is this person genuinely self-employed or are they actually working like an employee?”

That’s it. See, told you it was simpler than you thought. Everything else comes down to evidence. IR35 rules are really just there to stop disguised employment from slipping through the cracks.

What does it actually include?

An IR35 assessment looks at how you work with a client in practice, not just what your contract says, and decides whether your contract sits inside or outside IR35.

It doesn’t stop there though. An assessment also looks at whether your contract matches what actually happens day to day. If there’s a gap between the written terms and the working reality, that can create IR35 risk.

It also considers personal service. If the contract requires you specifically to do the work (rather than your business being able to send a suitably qualified substitute), that can point towards inside IR35.

And one important exception: if you’re acting as an office holder (for example CEO, CFO or CTO), that role cannot be held through a Limited Company in the same way. In those cases, it will automatically fall inside IR35.

{{instantquote}}

The simplest way to understand IR35

Before diving into rules and tests, here’s the clearest comparison:

IR35 at a glance

If you’ve ever thought, “This feels a bit like a permanent job with extra steps”, that’s usually where IR35 starts getting interesting. 

So what does this actually mean in real life?

If you ignore the legal wording for a second, IR35 is really about behaviour patterns. What working life looks like in practice. That’s why two contractors with similar job titles can end up with completely different IR35 outcomes. 

How is an IR35 assessment done?

Most IR35 assessments follow a simple flow:

1. Check employment status for tax using HMRC tool.

Using the HMRC checker, they can use the tool to identify your employment status for tax purposes. The tool will provide an outcome based on the answers given. 

2. Contract review.

The contract is reviewed alongside how the working relationship operates in practice, including factors like control, substitution, and how embedded you are within the business..

3. They make a decision on IR35 status.

A decision is made on whether the engagement sits inside or outside IR35. The client issues a Status Determination Statement (SDS), which explains the outcome and determines how you’re taxed. 

Why the result matters

If you’re inside IR35, your tax position shifts significantly. If you’re outside IR35, your structure only works if your working practices genuinely support it.

So it’s not just paperwork; it affects how your income is treated, how your business is structured, and ultimately how much flexibility you have.

{{ltd-guide}}

FAQ about IR35 assessments

If you’re in a little bit of a rush and don’t want to read the whole article (you’re missing out on at least one bad joke), then here are the key questions people usually ask about IR35 assessments.

What is an IR35 assessment?

It’s a review of a contractor’s working arrangement to determine whether the role is inside or outside IR35.

Who carries out an IR35 assessment?

Usually the client is responsible for carrying out the assessment and issuing a Status Determination Statement (SDS) with their decision. This applies to public sector organisations and medium to large private sector clients. 

If you’re working with smaller clients or overseas clients without a UK intermediary, the responsibility sits with your own Limited Company to assess the IR35 status and apply the correct tax treatment. 

What does an IR35 assessment look at?

 It reviews how the work is carried out in practice, focusing on areas like control, substitution, and how the contractor fits into the business.

Is it based only on the contract?

No. The contract is only part of it. The assessment also looks at real working practices day to day.

What happens after an assessment is complete?

The client issues a Status Determination Statement (SDS), which confirms whether the engagement is inside or outside IR35 and determines how the contractor is taxed.

Is it possible to work on both inside and outside IR35 contracts?

Yes, many contractors move between both depending on the role and the client. If you do, Crunch’s Limited Company Premium package lets you switch between setups easily. You can use your Limited Company for outside IR35 work, and access Parasol’s umbrella services for inside IR35 roles, helping you stay compliant no matter the contract type.

‍