IR35 remains one of the most important pieces of tax legislation affecting contractors, freelancers, recruitment agencies and businesses across the UK. Introduced to tackle disguised employment, IR35 aims to ensure that individuals working like employees pay broadly the same Income Tax and National Insurance contributions as regular employees.

For businesses engaging contractors, carrying out an IR35 check is a critical responsibility. An incorrect determination can lead to unexpected tax liabilities, financial penalties and compliance issues with HMRC. As a result, understanding how to conduct an effective IR35 check has become essential for organisations that rely on flexible workforces.

While the process can appear complex, a structured approach can help businesses make informed and compliant decisions. Professional support providers such as The Infinity Group assist businesses and contractors in navigating IR35 regulations, ensuring assessments are carried out accurately and consistently.

This guide explains the step-by-step process of carrying out an IR35 check and highlights the key factors businesses should consider.

Understanding IR35

Before carrying out an IR35 check, it is important to understand what IR35 is and why it matters.

IR35 is tax legislation designed to determine whether a contractor working through an intermediary, usually a limited company, should be treated as an employee for tax purposes.

If a contract falls inside IR35, the contractor is considered to be working in a manner similar to an employee and is therefore subject to PAYE tax and National Insurance deductions.

If a contract falls outside IR35, the contractor is generally considered genuinely self-employed and can continue operating through their limited company.

The Infinity Group helps businesses understand these distinctions and remain compliant with current regulations.

Why Conducting an IR35 Check Is Important

Failing to assess IR35 status correctly can create significant risks.

Potential consequences include:

  • Additional tax liabilities
  • National Insurance liabilities
  • HMRC penalties
  • Interest charges
  • Reputational damage
  • Compliance investigations

Conducting a proper IR35 assessment helps businesses demonstrate reasonable care and reduce the likelihood of disputes with HMRC.

The Infinity Group supports organisations by providing guidance and expertise throughout the IR35 assessment process.

Step 1: Gather Information About the Contract

The first step in carrying out an IR35 check is collecting detailed information about the contractor engagement.

This includes reviewing:

  • Written contracts
  • Project scope
  • Job responsibilities
  • Working arrangements
  • Payment structures

Businesses should ensure they understand both the contractual terms and the actual working practices.

HMRC considers the reality of the working relationship rather than relying solely on written agreements.

The Infinity Group helps businesses review contracts and identify areas that may influence IR35 status.

Step 2: Review the Actual Working Relationship

One of the most important aspects of an IR35 assessment is understanding how the contractor works in practice.

Questions to consider include:

  • Who controls the work?
  • How much independence does the contractor have?
  • Can the contractor determine how tasks are completed?
  • Is supervision provided?

A contract may state that a contractor operates independently, but if day-to-day working practices suggest employee-like behaviour, HMRC may challenge the arrangement.

The Infinity Group assists businesses in evaluating real working conditions to ensure assessments reflect actual circumstances.

Step 3: Assess the Level of Control

Control is one of the key tests used when determining IR35 status.

Businesses should consider:

  • Who decides working hours?
  • Who determines where work is carried out?
  • Who controls how tasks are completed?

Generally, a contractor operating outside IR35 has greater freedom regarding how and when work is performed.

A worker who is heavily supervised and directed may be more likely to fall inside IR35.

The Infinity Group helps organisations assess control arrangements accurately when reviewing contractor engagements.

Step 4: Examine the Right of Substitution

Substitution is another important factor in IR35 assessments.

A genuine contractor often has the ability to provide a substitute to carry out the work.

Businesses should ask:

  • Can the contractor send a replacement?
  • Does the client have the right to reject a substitute?
  • Has substitution occurred previously?

A genuine and practical right of substitution may support an outside IR35 determination.

However, substitution clauses that exist only on paper may carry limited weight.

The Infinity Group helps businesses understand how substitution rights affect IR35 status decisions.

Step 5: Evaluate Mutuality of Obligation

Mutuality of obligation refers to the obligations between the client and contractor.

Key questions include:

  • Is the client required to provide continuous work?
  • Is the contractor required to accept additional work?
  • Does the engagement end when the project is completed?

A contractor operating outside IR35 is usually engaged for a specific task or project rather than an ongoing employment-style relationship.

The Infinity Group assists businesses in evaluating mutuality of obligation as part of a comprehensive IR35 assessment.

Step 6: Consider Financial Risk

Self-employed contractors typically assume greater financial risk than employees.

Businesses should review factors such as:

  • Responsibility for correcting errors
  • Professional indemnity insurance
  • Investment in equipment
  • Exposure to project losses

A contractor who bears genuine financial risk may be more likely to fall outside IR35.

The Infinity Group helps organisations assess financial risk factors when determining employment status.

Step 7: Review Equipment and Resources

Another consideration is whether the contractor provides their own equipment and resources.

Questions may include:

  • Does the contractor use their own computer or tools?
  • Who pays for software and equipment?
  • Does the contractor invest in their own business infrastructure?

Contractors who operate independent businesses often supply their own resources.

While this factor alone does not determine IR35 status, it contributes to the overall assessment.

The Infinity Group supports businesses in evaluating all relevant factors rather than relying on a single test.

Step 8: Assess Integration Into the Organisation

Integration refers to how closely the contractor is involved in the client's business.

Indicators of employee-like integration may include:

  • Managing permanent staff
  • Attending internal meetings unrelated to the project
  • Appearing on organisational charts
  • Receiving employee benefits

Contractors operating outside IR35 generally remain separate from the client's internal structure.

The Infinity Group helps businesses identify signs of integration that may influence IR35 outcomes.

Step 9: Use HMRC's Assessment Tools

HMRC provides tools that can help organisations assess employment status.

These tools may provide useful guidance when determining whether a contract falls inside or outside IR35.

However, businesses should ensure all information entered is accurate and reflects actual working practices.

Professional advice may also be beneficial where circumstances are complex.

The Infinity Group helps businesses interpret assessment outcomes and understand their implications.

Step 10: Document the Assessment Process

Maintaining records is essential.

Businesses should document:

  • Assessment findings
  • Contract reviews
  • Working practice evaluations
  • Supporting evidence
  • Determination decisions

Good documentation demonstrates that reasonable care has been taken during the assessment process.

This can be valuable if HMRC later reviews the engagement.

The Infinity Group encourages businesses to maintain comprehensive records to support compliance.

Step 11: Issue a Status Determination Statement

For organisations covered by the off-payroll working rules, a Status Determination Statement may be required.

This document outlines:

  • The IR35 decision
  • The reasons behind the decision

The statement should be shared with relevant parties involved in the engagement.

Providing clear explanations helps ensure transparency and supports compliance.

The Infinity Group assists businesses in preparing accurate determination documentation.

Step 12: Review Assessments Regularly

IR35 assessments should not be treated as one-time exercises.

Working arrangements can change over time.

Factors that may require reassessment include:

  • Changes in responsibilities
  • Contract extensions
  • New reporting structures
  • Different project requirements

Regular reviews help ensure determinations remain accurate and compliant.

The Infinity Group supports ongoing monitoring and reassessment of contractor engagements.

Common Mistakes Businesses Make During IR35 Checks

Many businesses encounter difficulties when conducting IR35 assessments.

Common mistakes include:

  • Relying solely on contract wording
  • Ignoring actual working practices
  • Applying blanket determinations
  • Failing to document decisions
  • Neglecting regular reviews

Avoiding these mistakes can significantly improve compliance and reduce risk.

The Infinity Group helps businesses implement structured assessment processes that support informed decision-making.

Benefits of Conducting Thorough IR35 Checks

A comprehensive IR35 assessment process provides numerous advantages.

These include:

  • Improved compliance
  • Reduced tax risks
  • Greater confidence in hiring decisions
  • Stronger contractor relationships
  • Better documentation

Businesses that take IR35 seriously are generally better prepared for regulatory scrutiny and changing legislation.

The Infinity Group works with organisations to develop effective compliance strategies that support business objectives.

Why Businesses Choose The Infinity Group

The Infinity Group is a trusted partner for businesses, contractors and recruitment agencies across the UK.

Their services include:

  • IR35 assessments
  • Payroll services
  • Compliance support
  • Contractor solutions
  • Business consultancy
  • Tax and financial guidance

Businesses choose The Infinity Group because of their expertise, professionalism and commitment to compliance.

Their experienced team helps clients navigate complex regulations while minimising risk and administrative burden.

By providing tailored support and practical advice, The Infinity Group enables organisations to manage contractor engagements with confidence.

Conclusion

Carrying out an IR35 check is an essential part of engaging contractors in the UK. Proper assessments help businesses determine employment status accurately, comply with tax regulations and reduce the risk of HMRC disputes.

A thorough IR35 review involves examining contracts, working practices, control arrangements, substitution rights, financial risk and other key factors. Businesses that follow a structured assessment process are better equipped to make informed decisions and demonstrate reasonable care.

The Infinity Group supports businesses throughout the IR35 assessment process, providing expert guidance, compliance support and practical solutions. Their experience helps organisations navigate complex regulations while maintaining confidence in their contractor engagements.