IR 35 is anti avoidance legislation. It is aimed at the situation where a worker is essentially an employee but is are providing their service through a Limited Company resulting in avoiding tax and legal consequences associated with being an employee.

This means that at most IR 35 is a question of employment status. Unfortunately this is not defined by statute and we need to look at case law in order to determine a person’s employment status.

A key case, which is often quoted in IR 35 disputes, is the Ready Mix Concrete case (1968), which established three key points of a contract of employment.

The three points which must all be present are:

  1. An obligation to give personal service, i.e. all the work must be performed by the worker himself and no one else.
  2. There has to be mutuality of obligations, i.e. the employer is obliged to provide work or pay and the worker is obliged to accept it.
  3. There must be sufficient control to make the worker a servant of his master.

The three key points are detailed above but in less clear cut cases we can consider other factors, such as who bears the Financial risks, Intention, i.e. is it the intention of both parties to be in a business relationship for services, practical differences between the contractors and the clients own staff and finally the length of contract.

The important issue, which you will need to consider, is that all three factors detailed above must be present to be caught by IR 35. If one of the factors is absent then you will not be caught by the IR 35 rules.