IR35 anxiety best course of action

**jamesbrown** · 2 January 2026, 16:18

Welcome. A mod may choose to move this post into the relevant sub-forum.

First thing. If you're having bad thoughts, speak to someone. You need to ensure that you're in the right place, mentally, to address this. Ultimately, this type of situation is never that bad, even in the worst case scenario, especially as you are not currently under investigation and, therefore, have some control over what happens next.

Second thing. Get yourself in a position of knowledge. This is not unrelated to the first point, as being in a position of ignorance allows you to imagine all sorts of scenarios that are probably unrealistic. Currently, you don't really know where you stand, except to say that you've had a negative contract review for (I assume) the most recent iteration of the contract. If you're working for an overseas client with no UK presence, then you're under the Chapter 8 rules and you are responsible for assessing IR35 status and, ultimately, YourCo is liable. There are limits to that liability, though, depending on what due diligence you performed and, if you did some, it is very hard to transfer any liability to you personally. I will say, however, that the CEST tool is pretty worthless.

It is certainly true that work for an overseas client can be inside IR35, in general, although it is quite hard to achieve that status in practice, due to the (lack) of supervision or control typically present in such an engagement. It very much depends, though. Some of the pointers you mention are, indeed, quite unusual for such an engagement. Incentives are a tricky area but, ultimately, this would prove more relevant in a borderline case. The main tests of employment case law still stand w/r to D&C, MoO and RoS, although the emphasis on each (and others) is constantly changing as new cases emerge.

An important thing to remember is that IR35 status can change over time and there are several IR35 cases that demonstrate this. Your comment about being "slowly absorbed as an employee" may hint at this too. Thus, part of getting yourself into a place of knowledge will be to ask a professional to review the history of your engagement with this end client and determine whether it transitioned from outside to inside IR35 at some point or whether this was always a contract of service (i.e., inside IR35).

Ultimately, there isn't much point speculating about the positive and negative pointers here because you need professional advice. Of course, professionals may differ on borderline cases, so it would be worth speaking to whomever performed your initial contract and working practices review about the reasons for their opinion and, if you trust them, to look back at the earlier contracts/renewals too. You may want a second opinion if the first opinion points to this being borderline. It is absolutely critical that they consider the working practices and not merely the contract.

Another thing to think about very carefully is what you should do moving forward. Continuing to work for the client in this way is very risky, especially now that you have been made aware of the issues.

Are you a member of IPSE? If so, a good starting point would be to call their legal helpline. They are not good for much anymore, but they are good for this. Otherwise, you will need to seek your own professional advice. Do not rely on your accountant. Accountants are not IR35 specialists, they are accounting specialists and modestly competent legal/tax generalists at best. You may receive straightforwardly incorrect information or advice, however well meaning, so make sure you engage a specialist, such as Markel or Qdos to review your full history with this end client.

**northernladuk** · 2 January 2026, 16:58

Originally posted by zerotoone View Post

I am an IT consultant and software engineer who has been contracting for over 10 years with different clients during that time. I have had an International client for the last 4-5 years. I naively thought that having an international client with no UK presence, combined with having to buy my own equipment (mainly computers) and subscribing to third party data providers to build an IT system from scratch, automatically put me outside IR35. When I did the CREST in the beginning, it says I was outside the scope.

This is major oops and beyond naive. IR35 has been around a long time and there has been endless discussion on what puts you in/out IR35. To be operating for 10 years and thinking that list puts you outside is very poor. There has never been an automatic trigger to be outside, ever. You haven't even mentioned the main three pillars. Not having your contract reviewed is also very poor. Did you ever take IR35 insurance? You've just been playing tickbox IR35 and are likely to have put yourself inside because you don't know the difference a long time ago.

As it is the holiday less busy period and I have had some time to think, I’ve started questioning whether I am actually inside or outside IR35.

Bit late for that but it's a start.

I ran the contract past a specialist for the first time, and they said I am inside IR35.

There you go. You have an answer. Did you understand why they said that? If you did you might be able to work out what's tipped you over and if you can negotiate that out of your contract or at least mitigate it.

The timing was bad, as it was between Christmas and New Year. I should’ve waited until after the new year before disclosing it to my wife. She is not in a good place lately due to overthinking that we may be financially ruined and potentially facing bankruptcy, particularly with the thought of backdated tax and penalties.

There was no need to disclose it to your wife before you've even started investigating, if at all. Why would you do that? You're incompetence at your job is now affecting here when there was absolutely no need to.

I myself a grown man have been having negative thoughts and not present in the moment. I’m afraid I may not be able to function well, and this will have a performance impact on our only source of livelihood.We support two young children and have a mortgage and not much personal liquid cash. It’s been a hard week for all of us.

Well you need to stop thinking that. It's not the end of the world and can easily be managed. Might take a drop in income and a lifestyle change but it's not something that either you or your wife should be fretting about.

I do have to ask what you have as a warchest if you talk about not much cash? What were you goign to do when the contract ends?
We haven't had a contractor not understand what they do and living the high life on the cash without a thought in the world for a very long time. Used to be pretty common place but not anymore.

But anyway, onwards. Lets have a look at this. First thing that strikes me is what does 'For and against IR35 mean'? There are things in the both lists that indicate inside and things that might indicate outside so the For and Against thing doesn't make sense but lets look at each one

Project and contract for service basis. They list the projects and I work on them.

This is a red flag for outside. Isn't this how a permie works. They have a need for work, dish it out and the do it. To be outside you should come in, do a specific piece of work and leave. Each piece of work should have a contract to deliver it and then when it's done the contract ends. To have an overarching contract that covers a period and you just do what you told is inidicative of contol. It's what a perm does.

Company equipment and data subscription

Not an issue. Using company controlled kit and subscriptions is usually required for security and control. Client mandating their kit is pretty common so can be ignored for IR35 most of the time

Controls my own time

You mean the client controls your time? Red flag for IR35. That's what they do to employees. You should have some degree of flexibilty to deliver a product in your own way and timescales as long as you deliver on the time agreed. That said because you have to work with other groups who work client times you have to be 'professionally courteous' to work the same times and the same pace as them. You'd have to expand on what you mean by controls time. Deadlines and milestones is a project thing and both perms and contractors have to work to it, not an issue. Them micro managing you is an issue.

Controls how the work is done, choice of technology, design, and architecture

Not a problem. The output belongs to them and must be done a certain way so using their choice of tech etc is par for the course. This one is irrelevant to IR35

Controls where the work is done

Not the worst thing ever. Even as a supplier you have to kawtow to the client to some extent. Very rare you have open season to say where you want to work. Being asked to work 2 days a week in the office for example isn't an issue. All 3rd party suppliers are likely to have to do the same. It's proffessional courtesy and part of the delivery. With nothing else to go off I'd say as a general statement this isn't too much of an issue.

Contract can be terminated anytime

Need more details. You'd have to look at the exact wording of termination clauses to get the best idea. It has to be worded specifically to be a good indication of outside.
More important than termination clauses is substitution clauses. Does your contract allow you to offer a substitute and if you can is it worded properly. Right of Substituion is one of the pillars of IR35 and is key. No substitution generally means your contract is inside.

I get no employee perks, no holidays, no insurance

Fair enough but can you work when the client is on holiday? Do you have to fit in with their holidays around bank hols/xmas or can you work if you want? Good flag for outside if you can continue to work but it's not essential. Again professional courtesy dictates you may have to go along with their timings.

I have no say in who they hire, how they hire and don’t do appraisals

Irrelevant. It's possible to be part of hiring process as a specialist consultant that can advise what skills are needed for roles and to help find them in candidates. Got to be careful with it but even if you did it it's not generally a bad thing.

When the system grew I hired wife as an employee and made her a director. She monitors errors and exceptions in the system so that I can remediate them.

Ah this old chestnut. I'll bet all of NAT's money she isn't an employee. You might pay her minimum wage but that doesn't make her an employee. It's something you'd have to understand but she can be paid a nominal sum for supporting you as per the Arctic Case. Is this work documented with your client and in the contract or is it just something she does to help you under the pretence of being a company with two employees.
More importantly how does she do this? Does the client know? Does she use your laptop and credentials? You could be breaching your clients security policies by allowing a non cleared party to access their systems.

Fixed monthly term. No invoice was sent, but it’s in a shared drive for the client to see.

This is bad. So they just pay you and that's it? Like an employee? You fill a timesheet in and defacto get paid? What's the difference between you and an employee then?

We've been using the same contract template every year but with different targets and projects. It was an oversight on my part, I should've been proactively checking against IR35.

Not the worst thing ever. Many contracts are templated and re-used. If the wording is good, then use it. Is a new contract raised for every new project or is it just on rolling 3/6 months or something. If you have individual contracts for each separate piece of work then that's a good thing although over time it becomes obvious what your relationship is.

I am too tied to the system that if I go, the data subscription goes, and nothing functions.

Interesting one this. Not a problem in itself. Many contractors and proper suppliers have carved out a niche keeping the knowledge so they can sell it back for ever more. It's how all the big consultancies operate. Get in, own the data and become un-sackable. It's the relationship with the client that is the problem. Perms can also be too tied and you can't sack them as well. I've been to many a client with one guy who is the guru and if they leave they are utterly ruined. What's more important is your relationship and contract with the client. You being key isn't really a flag either way

Patent and inventions belong to the client.

Not a problem. Your contract usually stiplulates at IP and work belong to them anyway so irrelevant.

Slowly being absorbed like an employee because I’m the only one who knows the system I built.

To me this is the absolute doozy and this one is backed up by case law. The JLJ case back in 2011 was a split case because he started off outside and over 7 years became part and parcel so he was no longer an independant contractor. This one is your key problem. You need to look at a way of getting out of this and work very hard to not destroy your IR35 status. Unfortunately you'll need a very good understanding of what IR35 is to stay outsite. We've long argued however hard you try, long periods at a single client will put you inside at some point.

This is not part of our contract, this only started happening last year. They give incentives, cash and equity in a fund with a vesting period to my Ltd company as a holding co. The equity is not legally binding, as there was nothing signed. But the cash was reported as revenue. I think with owning an equity, I also run the risk of becoming an OEIC?

I've absolutely no idea what is going on here but if it's not in a contract and agreed it's a problem. Just from a business perspective, not even IR35. I'm not smart enough to understand what's going on there but I don't like the sound of it, particularly the bit about it not being part of the contract. Do they do this with employees or just suppliers?

I really don’t know what to do to get back our peace of mind. This is slowly consuming me and my wife. I am waiting for my accountant to return after the holiday to get some advice and what the best course of action is.

Firstly there is no need to get consumed. I'll admit it's a problem but there are ways of managing it. In the old days I would have said you were absolutely f**ked and you were top of the tree for an investigation. You're only out would have to been to quit immediatly, shut the company and hope to god they don't retro investigate. You are absolutely everything HMRC were trying to find and investigate.

In this day and age I don't think it's half as bad. The new IR35 regime has put 95% of people inside and they've got the client on the hook for IR35. They are going to make a lot more money looking at one client that's put all their people outside incorrectly and make a lot more money from it so I am not even sure if they are investigating individual incorrent IR35 status anymore. I haven't heard a bean about them for many years now. Some of our more learned posters might have a better view on this but we had an IR35 investigation maybe once or twice a year to chat about on here and I cannot remember the last one.

So to sate your mind you've a lot of work and some big changes to work at but risk wise I think it's pretty low and not something that needs to be ruining your mental health about.

In the meantime any advice would be appreciated or if anyone know who has dealt with a complex scenario like this before.

It's not really complex. It's a standard situation of someone not understanding IR35 and just ploughing on. We used to get it weekly in the old days with the same advice. Contract check, IR35 insurance, read and understand IR35 and at the very worst leave quick. The only complexity really here is the length of time you've been there and how you negotiate this back in to where it should be. Can you work it back to an outside determination? I very much doubt it so your only solution might be to just re-do your accounts as inside and pay what you should be for what the contract has morphed in to. The other difference is times have changed and I think your risk of being investigated now compared to the old days are vastly reduced. That said, that's not a reason to rest on your laurels and not fix this.

Disclaimer. I'm the loud shouty one that has too much time to answer questions, usually incorrectly. Also IR35 is complex so I'm pretty sure I'll have posted some stuff that other people don't agree with. Don't take this post as gospel, just some thick as mince Yorkshire pillock trying to help. Hopefully others while chime in with better advice but I think everyone would agree professional advice is key here, not some old hacks on a dying out of date forum.

**northernladuk** · 2 January 2026, 16:59

Originally posted by jamesbrown View Post

Welcome. A mod may choose to move this post into the relevant sub-forum.

Fat chance of that working with both the quality of the mods and the functionality of the forum

**northernladuk** · 2 January 2026, 17:02

I mentioned the three pillars but didn't say what they aren.. In brief...

The three pillars (or key tests) of IR35 determination are Control, Substitution, and Mutuality of Obligation (MOO), which determine if a contractor is genuinely self-employed (Outside IR35) or effectively an employee for tax purposes (Inside IR35). Control looks at the client's power over how, when, and where work is done; Substitution asks if the worker can send a qualified replacement; and MOO checks if the client must offer work and the worker must accept it.
The Three Pillars Explained

Control: This assesses the level of autonomy a contractor has.
- Inside IR35 (Employee-like): The client dictates how, when, and where the work is done (e.g., 9-5, mandatory meetings).
- Outside IR35 (Self-employed): The contractor controls their own methods, hours, and location, focusing only on deliverables.
Substitution: This tests if the service is truly personal or if a replacement can be provided.
- Inside IR35 (Employee-like): Only the specific individual can do the work (no right to send a substitute).
- Outside IR35 (Self-employed): A contractually agreed, genuine right to send a qualified substitute to perform the service.
Mutuality of Obligation (MOO): This examines the ongoing commitment between parties.
- Inside IR35 (Employee-like): Client must offer work, and the worker must accept (like a regular job).
- Outside IR35 (Self-employed): No ongoing obligation; it's project-based, with no promise of future work or obligation to accept it.

Why They Matter
These pillars help HMRC and tribunals decide if a contractor is 'disguised' as an employee, requiring tax and National Insurance contributions similar to a permanent staff member, or genuinely operating as a business. Real-world working practices, not just the contract, are crucial for determining status.

Don't worry too much about control as it's accepted often you have to play along with the client. Substitution has often been called a sham but it has to be there in the contract and the client has to agree it can be used. Only really useful if you've actually used it.
MoO is the one I think is killing you.

**hobnob** · 2 January 2026, 17:28

Originally posted by northernladuk View Post

There was no need to disclose it to your wife before you've even started investigating, if at all. Why would you do that? You're incompetence at your job is now affecting here when there was absolutely no need to.

Leaving aside any marriage guidance, OP said that his wife is also a director, so she's involved in this already.

To the OP: what exactly is your wife's status? Is she an employee and a director? (I.e. does she have an employment contract with your limited company?) Is she a shareholder? Does she need to be a director?

The best case scenario (for IR35) is if the client gives work to your company but doesn't care which of you actually does the task.

Originally posted by zerotoone View Post

When I did the CREST in the beginning, it says I was outside the scope.

Just as a minor nitpick, I think you mean CEST (Check Employment Status for Tax).

CREST is an organisation that does cyber security:
Cyber Security Services, Accreditations & Training - CREST

If you're talking to accountants etc., it's best to avoid any extra confusion.

**northernladuk** · 2 January 2026, 18:16

Originally posted by hobnob View Post

Leaving aside any marriage guidance, OP said that their wife is also a director, so she's involved in this already.

Good point well made.

To the OP: what exactly is your wife's status? Is she an employee and a director? (I.e. does she have an employment contract with your limited company?) Is she a shareholder? Does she need to be a director?

The best case scenario (for IR35) is if the client gives work to your company but doesn't care which of you actually does the task.

Whilst correct I'd imagine they would care when it comes to security and accounts so would depend on what he signed security wise. Did he do it as himself or on behalf of the LTD. She'd at the very least need an account to access the systems so don't think it's as straightforward as them not caring.

Just as a minor nitpick, I think you mean CEST (Check Employment Status for Tax).

CREST is an organisation that does cyber security:
Cyber Security Services, Accreditations & Training - CREST

If you're talking to accountants etc., it's best to avoid any extra confusion.

Hobnob is exactly right and something I missed.

Im sure the result did come back as outside, likey for two reasons. One is that the gig might genuinely have been outside but the other is you don't know the working practices on site so just making assumptions which means you'll end up answering what you think you need to answer and not the reality of the clients wishes. A good example is substitution. You will tick the box saying yes you can substitute but if you started and asked the client they may say no chance even though it's in the contract. Same with control. You don't know what degree of control they will impose etc. But anyway, that's irrelevant now as the the gig has changed over time and you've now become part and parcel of the organisation.

**zerotoone** · 2026-01-03T18:19:46

Why is this in the Welcome forum.

I spoke to an expert, here some key points we discussed yesterday:

The day to day operation of the client is not my main concern.

I had hired a third party (I had forgotten about this) at the very beginning to help with the initial data collection and populate the database that fed the first prototype.

I work on a project basis for most of the years and have had the right to refuse requests or to change its scope. Everything was built from the ground up, and once the systems are automated, they mostly run independently, with the client overseeing them. Of course there are some initial errors/issues that needs to be monitored and remediated.

I provided my own computing equipment, before we started the cloud infra, laptop, pc are all company expenses (not client's)

I do control my own time and don’t have to meet specific deadlines. No 9-5 and no "you need to work 8 hours daily, Monday to Friday"

I am responsible for where the work is done, how it is done, the choice of technology and data vendors. I can be in anywhere, I don't need to be at a specific location.

As for the equity, I never signed anything, therefore it can be be nullified/forfeited. This needs to be handled carefully, which I'll discuss next week.

I'm not treated like an employee, no benefits and no health insurance given, other than that questionable equity.

Originally posted by northernladuk View Post

It's not really complex. It's a standard situation of someone not understanding IR35 and just ploughing on. We used to get it weekly in the old days with the same advice. Contract check, IR35 insurance, read and understand IR35 and at the very worst leave quick. The only complexity really here is the length of time you've been there and how you negotiate this back in to where it should be. Can you work it back to an outside determination? I very much doubt it so your only solution might be to just re-do your accounts as inside and pay what you should be for what the contract has morphed in to. The other difference is times have changed and I think your risk of being investigated now compared to the old days are vastly reduced. That said, that's not a reason to rest on your laurels and not fix this.

You're right about the risk of being considered inside IR35 by staying longer. The latest project is starting to make it appear as though I’m being assimilated "as the SME" so we will need to correct the contract. Time to move on or perhaps an opportunity to practice the an "unfettered substitution" if the client allows?

The next project is Artificial Intelligence related which kind of excites me but I really don't know if I should go on now.

Originally posted by jamesbrown View Post

Are you a member of IPSE? If so, a good starting point would be to call their legal helpline. They are not good for much anymore, but they are good for this. Otherwise, you will need to seek your own professional advice. Do not rely on your accountant. Accountants are not IR35 specialists, they are accounting specialists and modestly competent legal/tax generalists at best. You may receive straightforwardly incorrect information or advice, however well meaning, so make sure you engage a specialist, such as Markel or Qdos to review your full history with this end client.

I am. Thank you.

Originally posted by hobnob View Post

The best case scenario (for IR35) is if the client gives work to your company but doesn't care which of you actually does the task.

That's actually a good point for the substitution part. She was an ex Software engineer herself but she's not well versed with modern tools, cloud and AI, she's like from the C++/VBA era (no offence), she’s understandably out of practice given it’s been many years.

IR35 anxiety best course of action