IR35 history – a concise timeline from 1999 to date

The Intermediaries Legislation (aka IR35) was first mentioned in a 1999 Inland Revenue press release. The rules to counter alleged tax avoidance via the use of ‘personal service companies’ came into effect in 2000, and remain in place today. Here we look at the key events which have taken place over the past 20+ years.

Here is a concise history of IR35 from its inception to the present day.

The original press release

On 9th March 1999, the Inland Revenue issued a press release (IR 35) which outlined the Government’s plans to clamp down on ‘disguised employment’.

This was a reaction to the growing use of one-man-band limited companies to provide professional services to clients.

The legislation targets individuals who work via an intermediary and enjoy the tax benefits of the corporate structure while working in the same way as a traditional employee.

You can still view the original release on the National Archives site.

After a consultation period, the Inland Revenue published a subsequent press release (here) on 23rd September 1999.

This second release attempted to provide a stronger safety net for those caught by IR35 (such as a 5% ‘expenses allowance’) and to provide more guidance on how employment status would be determined.

IR35 was introduced in April 2000

The IR35 rules came into effect via the Finance Act 2000 (Schedule 12) and have remained on the statute book ever since.

You can read more about what the rules cover in our guide to IR35.

The legal basis for IR35 is now contained in Chapter 8 of ITEPA 2003 (view legislation).

Opposition to IR35

One of the fiercest opponents of IR35 was the PCG (now known as IPSE). The PCG was a representative group for contractors and freelancers. The group sought permission for a judicial review of IR35 in early 2001.

The High Court ruled in favour of the Inland Revenue, and the contractors’ group lost its appeal in December 2001.

In the interim period between 2001 and now, a flourishing IR35 industry has emerged, comprising employment status experts, tax protection insurers, IR35 contract review services, and a range of associated services.

Business organisations and other interested parties have continued to lobby against IR35, claiming that the rules are unfairly targeted. A frequent criticism is that the official advice is too ambiguous to provide individuals with any certainty over their IR35 status.

Overhaul of the IR35 regime – 2011

When the Coalition Government came into office in May 2010, one of George Osborne’s first announcements was the creation of the OTS (Office of Tax Simplification).

The OTS was tasked, amongst other things, with suggesting ways to improve IR35.

On 10th March 2011, the OTS provided the Government with three potential solutions to IR35: suspension followed by abolition; the creation of a series of business tests; and keeping IR35 in place but overhauling the way it is administered.

Given the potential direct and indirect revenue losses from removing IR35 could be significant, the Chancellor opted to keep IR35 in place. However, he pledged to overhaul the way HMRC had been dealing with the legislation.

The improvements demanded of the IR35 regime included:

• creating a dedicated helpline staffed by specialists.
• publishing clear guidelines and scenarios to help individuals determine their IR35 status more easily.
• restricting IR35 reviews to high risk cases.
• creating a new IR35 Forum (see below) to monitor HMRC’s improved enforcement of IR35.

The IR35 Forum

The Forum itself has a diverse membership, including representatives from leading recruitment and contracting industry bodies (APSCo, REC, FCSA, FSB).

It also includes employment status specialists, members of the leading accountancy bodies (ICAEW, CIOT, ACCA), and HMRC personnel.

You can access meeting minutes and background information on the Forum here. Minutes are published quarterly.

Business Entity Tests

Following a series of meetings, HMRC published its new ‘Business Entity Tests’ together with a set of typical IR35 scenarios on its website in May 2011.

The tests were designed to give participants an idea of the risk they face of being selected for an IR35 investigation.

However, the way the test results were scored was widely criticised, as most contractors would be at a ‘medium’ or ‘high’ risk of investigation, according to the results.

In October 2014, HMRC announced that the unpopular BETs would be abolished from April 2015.

‘PR Plan’ for IR35 – Jan 2015

In early 2015, HMRC released a series of 32 recommendations to improve IR35, based on input from the IR35 Forum. This included providing more clarity for those potentially affected by the rules.

Dismissed by one expert as a ‘PR Plan for IR35’, the plan lacked substance, and the industry’s uncertainty remained as strong as ever.

How to make IR35 more effective?

Following the 2015 Summer Budget, the Government released a discussion document entitled ‘how to make IR35 more effective in protecting the Exchequer’.

This raised the possibility that, for the first time, clients might be forced to determine contractors’ employment status.

HMRC believed that IR35 is ineffective and that “non-compliance with the legislation is widespread”.

In fact, the Government stated that non-compliance may cost the Exchequer £430m per year – a figure that has been widely ridiculed by industry experts.

Little has changed regarding such claims since the Intermediaries Legislation first became law in 2000.

Off-Payroll Working in the Public Sector

On Budget Day 2016 (March 16th), the Government announced that there would indeed be a clampdown on so-called ‘off-payroll working’ within public sector organisations.

Draft legislation was published in December 2016, alongside a technical note which explained the practicalities of IR35 enforcement by public sector bodies after April 6th 2017.

In essence, from this date, public sector clients became responsible for determining whether their workers are caught by IR35.

If they are deemed to be ’employees’, then the client (or fee-payer) is responsible for operating PAYE and deducting income tax and NICs at source.

Further HMRC guidance was published in February 2017 to help contractors and clients understand the implications of the new rules.

New IR35 Test – March 2017

A new IR35 Employment Status Test (ESS) was launched in early March 2017 to help workers, clients, and agents determine whether or not someone is caught by IR35.

This tool evolved into the CEST tool that is in use today, which is still hosted by HMRC (Check Employment Status for Tax).

HMRC has stated that it will stand by the results of any given test, provided the information entered is accurate, and the engagement reflects the answers given.

Off-Payroll extension to the private sector

At the October 2018 Budget, the Chancellor announced an extension of the existing off-payroll working rules to the private sector.

Importantly, the legislation introduced a small company exemption, meaning that small private sector clients (as defined under the Companies Act thresholds) would not be responsible for determining status. In those cases, responsibility remains with the contractor under Chapter 8.

Finance Act 2020 – Debt transfer provisions

The Finance Act 2020 introduced joint and several liability provisions for the off-payroll rules.

These provisions allow HMRC to transfer unpaid PAYE and NIC liabilities up the labour supply chain and, in certain circumstances, to the end client, where the fee-payer fails to account for the tax due.

April 2021 – Off-Payroll rules go live in the private sector

As a result of the COVID-19 outbreak, the Government deferred the implementation date of the private sector IR35 changes from April 2020 until April 2021.

From 6 April 2021, Chapter 10 of ITEPA 2003 applied to medium and large private-sector clients.

Clients became responsible for issuing Status Determination Statements (SDS), and the fee-payer became responsible for operating PAYE where a contract was deemed to fall inside IR35.

The term ‘IR35’ now has a wider meaning

Strictly, the term ‘IR35’ refers to Chapter 8 of ITEPA 2003 (and originally to the Inland Revenue press release) in cases where the contractor is responsible for determining their own employment status.

Chapter 10 of ITEPA 2003 provides the legal basis for the engager (‘client’) becoming responsible for determining the employment status of the worker in the public sector (from April 2017) and private sector (from April 2021).

Of course, the term ‘IR35’ is widely used to describe both the original legislation and the off-payroll addition post-2017.

2020 – an IR35 review

Following pledges made in the run-up to the December 2019 General Election, the Chancellor announced that an IR35 review would be undertaken.

In reality, this exercise focused on ensuring the smooth running of the private sector off-payroll rollout, rather than revisiting the underlying legislation.

‘Off-Payroll’ was set to be abolished in April 2023

On 23rd September 2022, Chancellor Kwasi Kwarteng announced that the off-payroll working rules would be repealed from April 2023.

The original Chapter 8 IR35 rules would have remained in place.

‘Off-Payroll’ repeal is cancelled – Government U-turn

On 17th October 2022, Chancellor Jeremy Hunt announced that the proposed repeal of the off-payroll reforms would not go ahead.

The November 2022 Autumn Statement confirmed that Chapter 10 would remain in force.

IR35 offset mechanism – 2024

In 2024, legislation was introduced to create an IR35 offset mechanism.

This allows certain taxes already paid by a contractor’s limited company (such as Corporation Tax and dividend tax) to be offset against PAYE liabilities arising from an IR35 assessment under the off-payroll rules.

The measure was introduced to address concerns about perceived double taxation in cases where HMRC successfully challenges a status determination.

Key tribunal developments – 2024 onwards

In 2024, the Upper Tribunal decision in the Professional Game Match Officials Ltd (PGMOL) case provided further clarification on how mutuality of obligation and control should be considered when assessing employment status under IR35.

The ongoing litigation in the Atholl House case (involving broadcaster Kaye Adams) has also continued to shape the interpretation of employment status principles, reinforcing the fact that IR35 determinations remain highly fact-specific.

You can find out more about landmark IR35-related cases and the latest news via IR35 Update.

[Last updated – February 2026]