Top five IR35 steps to help prove outside IR35 status
IR35, or the Intermediaries legislation to give it its original name from 2000, is still in force in the UK, and all the signs are, IR35 isn’t going anywhere.
In 2025-26, the ‘Repeal IR35’ brigade is a lot quieter…
There have been campaigns over the years by contractors and those on behalf of contractor workers to try to get the much-disliked legislation repealed.
But only a little while ago (Feb 2025), HMRC added a link to a recorded webinar about its Off-Payroll Working (OPW) rules for contractors. Even more recently (May 2025), HMRC updated its official guidance “Appeal an employment intermediary penalty.”
It’s an implied ‘no’ from the Labour government on revoking IR35 off-payroll rules
Do you think that the government would go to the trouble in this busy, current tax year (2025-26), of updating its materials on IR35 if it had any inclination to remove IR35 or revoke the OPW rules? No, we don’t think so either!
This IR35 guide’s top tips to help beat IR35 are time-honoured…
So we want to offer what, at least for many, many contractors over the years, have proven to be the top 5 steps to help beat IR35.
A quick caveat…
There are many more steps than just five to take to assist with keeping “Inside IR35” at bay. Naturally, our suggestions can only provide guidance.
With a piece of legislation as open to interpretation as IR35, there can be no cast-iron guarantee of beating IR35 in five swift actions. This is especially the case with an HMRC hungry for revenue.
IR35 is three sets of rules – which set is your limited company affected by?
Before we detail our steps to help contractors beat IR35, we recommend you read our comprehensive guide to IR35.
It was prepared in conjunction with experts on the Intermediaries legislation (Chapter 8 ITEPA 2003) and the off-payroll working legislation (Chapter 10 ITEPA 2003).
Updated for 2025-26, our IR35 guide is aimed at contractors and outlines that, currently, “IR35” can refer to three frameworks:
- IR35 of April 6th 2000; potentially applicable in 2025-26 but only where PSCs supply a client defined as a “small company”
- IR35 reform of April 6th 2017; more technically known as the Off-Payroll Working rules, effective today in the public sector
- IR35 reform of April 6th 2021; more technically known as the Off-Payroll Working rules, effective today in the private sector (except for where the end-user is a “small company” according to the Companies Act 2006)
Clarity matters with opaque IR35
With something as unclear as IR35 can be, we want to be as clear as possible.
Our top 5 steps to help beat IR35, below, relate to ‘old’ IR35 — the first framework of 2000.
Under this original version of IR35, the actions that a contractor running their own Personal Service Company (PSC), such as a limited company, can take have the potential to significantly affect whether their IR35 status is “Inside IR35” or “Outside IR35”.
For outside IR35, don’t bank on the banks
By contrast, nowadays, if you were to supply a bank as a limited company contractor, under the OPW rules, the actions PSCs can take to avoid the likely “Inside IR35” status determination might be far and far between.
The OPW rules will invariably be in play – whether inside or outside – as the bank won’t likely be a “small company”. Why?
Well, under the OPW rules, the HMRC liability is with the “fee-payer,” typically the end-client or the recruitment agency. Additionally, by wanting to avoid ANY potential HMRC risks whatsoever, banks have arguably become the most risk-averse client-type.
In other words, banks are arguably among the most likely end-clients in 2025-26 to determine a contractor assignment as “Inside IR35.”
No PSCs please – we’re banks!
We’re disclosing this information about banks as a fan of banks… But some banks are so risk-averse to IR35 and the potential for HMRC liabilities from taking on contractors and determining their IR35 status incorrectly, that they have banned the recruitment of PSCs entirely.
However, we do like banks! Indeed, as mortgage lenders, banks offer our brokers specialised, ‘off-market’ mortgage deals to the off-payroll contractors we support. If you’re an OPW contractor, get in touch with our specialist broking team today, as they will explain how using your gross contract rate lets you borrow more for a mortgage than traditional underwriting methods.
But in the IR35 and OPW space, banks are not an easy client for an “Outside IR35” contractor to secure.
Top 5 steps to help beat IR35 (and why you need them)
Before we outline our top 5 steps to help beat the Intermediaries legislation, some reassurance might now be necessary — especially if you wanted to land a bank as a customer before reading this article, but now are a bit worried!
Organisations up and down the UK have become too used to hiring flexible workers for contracting to disappear. We believe the UK government is aware that Britain won’t be able to compete internationally without the flexibility that freelance contracting brings.
Organisations, themselves, know that they can’t always call all the shots.
That said, if you’re a limited company contractor, you CANNOT leave the responsibility to others to ensure you’re working as self-employed for tax purposes.
At the sharp end, that means safeguarding your contractor business against HMRC investigators, should they come calling. More immediately, it means preparing yourself as a bonafide business in the eyes of your recruitment agency or client, and operating that way each and every working day.
What you can do to help beat IR35
You can take the following five steps to show that your business is IR35-compliant. Be aware, though, these steps don’t revolve around how much tax you will or won’t pay. The steps DO revolve around leaving HMRC’s IR35 inspectors in no doubt about your IR35 compliance. To achieve that, you must prove you’re a business entity.
Now we’ve hopefully set the scene for IR35 compliance in 2025-26, here’s our top 5 steps to help beat IR35.
Outside IR35 tip 1: Create, populate and maintain an IR35 library
All contractors should have their contracts reviewed by an IR35 specialist. Our pick of the bunch? It’s Qdos. They’re experts in IR35, with experience advising on off-payroll working since the original IR35 legislation of 2000.
Today, in 2025-26, Qdos specialises in IR35 compliance and business protection. Qdos has built an entire suite of products and services to address the IR35 legislation. Their products are aimed at achieving compliance, and at the heart of that is Qdos’s IR35 contract review (also known as the Qdos IR35 Contract Assessment).
The value of an IR35 contract assessment
An IR35 contract review puts your actual working practices into black and white. Getting in writing your day-to-day working reality, signed off by a respected IR35 expert who HMRC will be aware of should they investigate you, can be a game-changer.
Of course, it all rather assumes that the results of the IR35 contract review are positive, meaning they strongly indicate “Outside IR35” status!
Your IR35 contract review should become the first and most fundamentally important document in your new IR35 Library. And you can start to build this IR35 Library using this initial IR35 contract review or assessment document.
IR35 Log: Record your contractor actions and end-client treatment
Next, to maintain and populate your IR35 Library, draw up a second document to log the reasons that show you to be a genuine contractor.
This ‘IR35 Log’ is particularly important once your working practices change, following the IR35 contract review.
Also, update the IR35 Log when you secure a new temporary assignment elsewhere, because the assignment will come with a new contract and working practices.
What’s the point of an IR35 Log?
Your IR35 Log must be immediately clear about how the treatment you receive is different to the treatment that the client’s internally employed staff receive. The goal? Anyone reading the log would quickly be able to see lots of evidence that you are NOT a disguised employee.
In summary, to help beat IR35, you now have an IR35 Library consisting of:
• IR35 Contract Assessment/Review, detailing how your “Outside IR35” contract and working practices are aligned, demonstrating you to be genuinely self-employed for tax purposes.
• IR35 Log, noting key differences between the treatment you receive and the treatment employees receive, showing that your working practices are not the working practices of a disguised employee.
Your IR35 Library should contain a third document, and we will identify it later. Or just scroll down now to “Outside IR35 Step 5,” if you’re a budding IR35 Librarian who just can’t wait to get filing all three key IR35 documents!
Outside IR35 Step 2: Take out IR35 insurance (also known as ‘IR35 protection’)
Holding business insurance shows that you’re accepting commercial risk. It’s a tick in the box towards being self-employed for tax purposes. Professional Indemnity, Public Liability, even ‘E-Risks’ insurance will support your ‘in-business,’ “Outside IR35” position.
The value in paying out for IR35/business insurance
Paying regular insurance premiums through your company distinguishes you from disguised employees. Again, Qdos is our recommendation for IR35 insurance or IR35 protection, sometimes also referred to as “IR35 cover.”
Your IR35 insurance policy is NOT the third document we mentioned above as being a must-keep in your IR35 Library. But there’s no harm in filing in the library the important IR35 insurance policy details, such as policy number and your insurance provider’s phone number. Typically, contractors can buy IR35 and other business insurance policies for a surprisingly low amount of money each month.
Outside IR35 Step 3: Substitution
Some limited company freelancers and contractors look like they provide an individual B2B service. For many contractors in IT or technology, the fact that the niche skill they offer sets them apart from others in their field was the catalyst for them to freelance in the first place! So to some contractors, the idea of sending a substitute in their place can feel counterintuitive.
But substitution – i.e. the contractual right and ability to send in your place a trained replacement (who your limited company must engage and pay), is a big “Outside IR35” signpost.
What’s the thinking behind a lack of personal service signalling outside IR35?
Based on the thinking that a bonafide commercial business wouldn’t just have one worker and would have free choice over who does the work, substitution will always be considered by HMRC as a key test in determining IR35 status.
So ask yourself – could you send a substitute in your place, whether it’s for a week, or for the entire duration of the contract, because you are simply unavailable? If you can answer “yes” to this key IR35 substitution question, you’re well on the way to proving that you’re a commercial business in the eyes of HMRC.
You can read more about what HMRC says about substitution, including how to tell if a Right Substitution (RoS) is genuine, in HMRC’s ESM0535, here. Once upon a time, some clients might have baulked at the thought of you sending a replacement!
Right of Substitution: here’s three substitution must-dos for 2025-26
Any contractual Right of Substitution (RoS) provided by an end-client to your limited company, in your contract, needs to be backed up in practice, meaning your RoS:
1. Cannot be unreasonably restricted (meaning the end-client cannot reject a substitute on grounds outside of the substitute being unsuitably qualified) – i.e. it must be “unfettered” to negate personal service;
2. Must be genuine, insofar as it’s not just contractual ‘window dressing’ because it has, in fact, been actioned, or is plausible and capable of being actioned in practice;
3. Should be exercisable at will for any reason, not just confined to illness on your part (as the primary PSC worker). In fact, in the non-IR35 case of ‘Shanks,’ the courts held that a Right of Substitution which is confined to when the contractor is unable to carry out the work due to illness is a ‘Personal Service’ indicator, and therefore would be a pointer towards “Inside IR35.”
You can read the judgment in Mrs J Shanks V Scottish Qualifications Authority, which was handed down on May 25th 2025, here.
Recruitment agencies and Right of Substitution (RoS)
Agencies have been known to put up resistance to the Right of Substitution. However, once you explain that ‘the substitute’ (whom you should be free to choose yourself and appoint on behalf of your PSC), has the same skill set, and that your PSC will pay the sub, it should be less of an issue.
We recommend that you be unabashed about your right of substitution as part of building an “Outside IR35” strategy. Remember, you are contracting on a B2B basis. The contract is with your limited company, not you as an individual.
But we’d advise against substituting if you’re not sure that your replacement would be up to the job, in terms of their expertise or skills! If your substitute damages the relationship you’ve worked hard to build (with your agency and/or end-client), you’ll have more than just HMRC to worry about!
Outside IR35 step 4: Stationery — potentially worth the paper it’s printed on
Contractors may not believe that such an everyday thing like stationery can make a small but potentially significant difference to IR35 status.
However, when assessing IR35, it’s the ‘overall picture’ that matters when both HMRC and the courts come to making an “Outside” or “Inside” IR35 determination. Therefore, it is important that the minor IR35 status details (Stationery) support the major IR35 status factors (Substitution).
IR35: Stationery quick-wins
Truly establish your business identity with company-emblazoned:
• business cards;
• letter paper (logo-headed);
• internet platforms/profiles, social media accounts, and your own corporate website;
• listings and/or marketing materials, so your brand is effectively advertising your business.
Stationery helped ECR Consulting win its IR35 case…
The IR35 case of ECR Consulting is a cracking example of how contractors can use company stationery as part of a wider ‘in business on your own account’ strategy.
In finding in favour of the taxpayer who argued they were “Outside IR35,” the First-Tier Tribunal said in 2011:
“ECR is in business on its own account. [ECR] produced to the Tribunal copy business cards and company stationary [sic]. ECR operates from a dedicated business area at her home. It has company domain and website. ECR advertises its services and is a member of [a professional trade body].”
You can read the judgment in ECR Consulting Ltd v HMRC, which was handed down in May 2011, here.
What about stationery as an IR35 factor in 2025-26?
Nowadays, in 2025-26, contractors would have to provide more substantial ‘in-business’ evidence than a dotcom address, a few company name-emblazoned pencils and a jazzed-up Word document!
But company-branded documents, digital or otherwise, can help tick the ‘stationery box’ if an IR35 inspector calls, which in turn can help tick the ‘in-business’ box, which in turn can help prove that you’re operating outside IR35!
Outside IR35 step 5: Get a signed Confirmation of Arrangements (CoA)
An IR35 enquiry will place huge emphasis on the actual relationship with an end-client. Therefore, HMRC will seek to question your engager about the day-to-day working reality of your services. That’s when your situation is most precarious.
Who knows what the client will say when put under pressure and faced with a gruelling list of questions from HMRC?!
A signed CoA document can help avoid undermining outside IR35 status
To help head off ‘wrong’ answers from an end-client representative, get a Confirmation of Arrangements document drawn up (by you) and signed (by both you and the end-client).
With this on file, any end-client representative can simply refer to the Confirmation of Arrangements if asked tricky questions by HMRC about your contractor working practices.
Such a document, bearing the client’s signature, minimises the window for the end-client inadvertently giving unhelpful answers or providing information that could undermine your “Outside IR35” position.
Qdos knows the IR35 importance of confirming working arrangements
Again, Qdos is your friend.
The Qdos team can provide a template CoA — a straightforward document that sets out the true facts of the engagement between contractor and client.
While it can sometimes be a challenge for contractors to obtain the client’s signature/approval, a CoA document has been known to stop HMRC and its IR35 investigators in their tracks, provided, of course, that the arrangements are IR35-compliant!
If you are faced with a client who’s reluctant to sign your CoA document, you can reassure them that a Confirmation of Arrangement document is not a legally binding contract. It’s not even a legal document!
IR35: What is the aim of a Confirmation of Arrangements (CoA) document?
The sole aim of a CoA document is to confirm the working practices between the PSC and the engager. And in turn, that confirmation should help you confirm your tax position, should HMRC bring it into question during an IR35 enquiry.
You can also reassure any end-client that a CoA can benefit both parties by saving hassle, time and potentially money, if your PSC were to become the subject of an IR35 enquiry that dragged their organisation into the investigation.
Here’s Qdos’s free Confirmation of Arrangements Document
For further tips on trying to confirm arrangements with an engager for IR35 compliance purposes, reach out to Qdos, which offers their confirmation of working arrangements document, here.
Just make sure to get your working practices and arrangement checked over by the Qdos team before asking your end-client to countersign it!
An IR35 CoA document is the third entry in your IR35 Library
It is the Confirmation of Arrangements (CoA) document, which, when signed as the end-client’s written agreement of your working practices, deserves a place in your IR35 Library.
This third document in your IR35 Library is particularly useful if client representatives change over the course of your contract. The CoA document also comes into its own where you’ve been contracting for the same engager for an extended period and need to clarify the relationship.
The key to beating IR35 is to always think, operate, and present like a biz…
At all times, as a contractor who wants to work on an “Outside IR35” basis, you must think, operate and present yourself as a business.
Ensure that from any outsider’s perspective, you appear as a commercial entity, contracted with other parties such as a recruitment agency and an end-client.
If in any doubt, speak to Qdos or another trusted and qualified IR35 adviser. And that adviser could be your accountant, but make sure that they are a contractor sector accountant with IR35 and Off-Payroll Working know-how.
In summary: Top 5 steps to help beat IR35
In the meantime, follow our five steps to help beat IR35 — in summary:
1. Build and populate an IR35 Library: key documents you’ll need in the event of an HMRC investigation.
2. Take out IR35 Insurance: purchase IR35 protection or other business/tax cover to provide a financial/defence buffer should an HMRC inspector call.
3. Substitute: make sure you have an unfettered, genuine RoS and, ideally, action your sub clause by sending in your place and paying a suitably skilled replacement.
4. Stationery: get purchasing company-branded items; both digital and physical items.
5. Confirm Working Arrangements: get working practices checked by an IR35 expert, confirmed to be “Outside IR35” and then signed off by the client.
Remember, expert help with IR35 can pay for itself many times over…
Whatever you do, don’t get caught “Inside IR35” for the sake of a phone call — whether it’s to Qdos, to a company stationery provider, or to your client just to confirm arrangements!
There’s a lot of noise around IR35 and the off-payroll working rules. But the buzz you’ll get by taking these five proactive steps to help beat IR35 should provide a very sound start to protecting your outside IR35 position from HMRC’s clutches.
Share: