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

However, although an accountant may be able to give advice, IR35 is determined by your employment status (how you actually work). There is no accounting ‘magic bullet’ that can influence whether your work is inside or 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 used by tribunals to establish the true nature of the working arrangement between contractors and clients.
• If HMRC deems that the working arrangement is one of employment, despite any ‘outside’ clauses in your contract, you may be found to be inside IR35.

2. In many cases, clients make the decision

• Since the off-payroll rules were introduced in 2017 (public sector) and extended in 2021, responsibility has, in most cases, shifted.
• 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, has any influence over your employment status.
• 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 help ensure that your contracts are well structured and contain the right terms to demonstrate that you are working in a self-employed manner, but that is only part of the picture.
• What matters more 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 behaviour often overrides everything else

• 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 yield different outcomes, depending on how the work is carried out and how the client views the arrangement.
• 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

• You may face significant back taxes if HMRC successfully challenges a past outside IR35 decision.
• Past contract income may be subject to income tax, National Insurance and possible penalties.
• An accountant can help you deal with an investigation or help you find professional representation.

What an accountant can do

Although they can’t determine 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 working practices so they reflect the terms of your contract
• 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
• Recommend IR35 insurance where appropriate, particularly under Chapter 8, where the risk sits with the contractor
• Handle tax calculations, including deemed payment if your work is caught by IR35.

In summary

An accountant can help you manage IR35 risk, but they cannot remove it.

Your IR35 status is determined by both your contract terms and the way you perform your work. Your accountant can help you navigate IR35, but cannot influence your status if your working practices do not support an outside position.