What is an IR35 accountant? (and why the term is misleading)

Some contractor accountants specialise in IR35 and can give useful advice on the rules. However, your accountant cannot influence your IR35 status simply by structuring your company or accounts in a particular way.

IR35 is based on your employment status and, crucially, the terms of the engagement and how you actually work. There is no accounting ‘magic bullet’ that can make an inside IR35 engagement fall outside the rules.

Why an accountant can’t influence your IR35 position

1. IR35 is based on employment status

• Your employment status is based on the terms of your contract and your working practices. Are you working in business on your own account, or are you more likely to be a disguised employee? Read our guide to the IR35 rules.
• Key status factors, such as control, substitution, and mutuality of obligation (MOO), are considered when establishing the true nature of the working arrangement between contractors and clients.
• If HMRC challenges the arrangement and the reality of the relationship points towards employment, ‘outside’ clauses in your contract will not necessarily protect you. Ultimately, a disputed status can be decided by a tribunal or court.

2. In many cases, clients make the decision

• Since the off-payroll rules were introduced in 2017 (public sector) and extended in 2021, the responsibility for determining IR35 status has moved to end-clients.
• Where the client is a medium or large organisation, they are responsible for determining IR35 status under the off-payroll rules.
• This means no accountant, or any other adviser, can make the formal status determination on the client’s behalf.
• If you work for a ‘small’ company, then the original Chapter 8 IR35 rules apply, and you are responsible for determining your own IR35 status.

3. Working practices must match the contract terms

• An accountant can explain how your contract and day-to-day working arrangements affect IR35, but for a professional status assessment, we always recommend contractors use an IR35 contract review specialist.
• What matters is how the engagement works in practice, including day-to-day behaviour and the client’s expectations.
• If your working arrangements resemble those of an employee – for example, you have high client supervision and can’t provide a substitute – the contract is more likely to fall within the IR35 rules.

4. Client risk appetite can affect your options

• Many large organisations take a cautious approach to IR35 and apply blanket determinations.
• Some have stopped engaging limited company contractors altogether, as the tax risk to them if HMRC reverses a decision can be significant.
• These decisions are commercial and risk-based, and fall entirely outside the accountant’s control.

5. IR35 is subjective and case-by-case

• There isn’t a simple formula you can apply to stay outside IR35.
• Two contracts can look almost identical on paper but have different outcomes, depending on the contractual terms and how the work is actually carried out.
• An accountant can help you understand IR35, but if you want a view on your actual status, an IR35 specialist is usually more appropriate.

6. HMRC challenges and financial risk

• An incorrect outside IR35 determination can result in significant tax liabilities if HMRC successfully challenges it.
• Responsibility for any unpaid tax and National Insurance depends on whether the engagement falls under the original Chapter 8 IR35 rules or the Chapter 10 off-payroll rules.
• An accountant can help you deal with an investigation or help you find professional representation.

What an accountant can do

Although they can’t control your IR35 status, a specialist contractor accountant is a very valuable member of your setup. They can:

• Coordinate IR35 contract reviews with employment status specialists
• Advise on how your working practices may affect your IR35 position
• Help you plan for different outcomes, whether inside or outside IR35, and the different tax treatments
• Support you in the event of an HMRC enquiry
• Put you in touch with an IR35 insurance provider, particularly if you’re working for a small company, and the employment status determination rests with the contractor, not the end-client.
• Handle tax calculations, including deemed payment if your work is caught by IR35.

In summary

Ultimately, your IR35 status depends on your contract terms and the way you undertake your work (i.e., your working practices).

A specialist accountant should be very knowledgeable about IR35, as it is of fundamental importance in the contracting industry, but they have no special ability to remove your exposure to the rules.