Outside IR35

An engagement is "outside IR35" when the working relationship is genuinely business-to-business — substitution rights, low control, no mutuality of obligation, financial risk borne by the contractor, multiple clients, etc.

Tax consequences: the contractor can pay themselves as a Ltd director — small salary at the personal allowance, dividends for the rest — and keep significantly more of their day rate than under PAYE.

Document everything: contract, working practices, client interactions, invoices, evidence of multiple clients. If HMRC challenges your status, the evidence is what counts.

Related terms

• IR35 — The UK's off-payroll working rules — they decide whether a contractor should be taxed as a deemed employee.
• Inside IR35 — An engagement that falls within IR35 — the contractor is taxed as a deemed employee.
• Personal Service Company (PSC) — A Ltd company through which a single contractor provides their services to one or more clients.