IR35 legislation continues to be a major compliance responsibility for UK end clients and recruitment agencies that engage contractors through limited companies. Since the off-payroll working reforms transferred responsibility for status determination to end clients in the private sector, the importance of carrying out a robust IR35 check has increased significantly. Failure to do so can result in serious financial, legal, and reputational consequences.

Understanding IR35 and the Off-Payroll Working Rules

IR35 is designed to prevent disguised employment, where individuals work like employees but operate through their own limited companies to reduce tax and National Insurance liabilities. Under the off-payroll working rules, responsibility for determining employment status sits with the end client for most private sector engagements.

End clients must carry out an IR35 check for each contractor engagement and issue a Status Determination Statement explaining whether the engagement is inside or outside IR35. Agencies in the supply chain also have responsibilities, including passing determinations down the chain and ensuring the correct party accounts for tax.

Without a proper IR35 check, both end clients and agencies are exposed to compliance failures and HMRC scrutiny.

Protecting Against HMRC Investigations and Financial Risk

One of the primary reasons an IR35 check is essential is the financial risk associated with getting it wrong. HMRC has the power to recover unpaid income tax, employee and employer National Insurance contributions, interest, and penalties from the fee payer or end client where compliance failures occur.

IR35 liabilities can run into tens or even hundreds of thousands of pounds, particularly where multiple contractors are involved. HMRC investigations are time-consuming, disruptive, and can damage relationships with contractors and agencies.

A thorough IR35 check provides evidence that reasonable care has been taken. The Infinity Group supports UK organisations by delivering independent, defensible IR35 assessments that reduce exposure to HMRC challenge.

Meeting Legal Obligations and Demonstrating Reasonable Care

UK legislation requires end clients to take reasonable care when carrying out IR35 checks. Simply issuing a blanket determination or relying on assumptions does not meet this requirement.

Reasonable care means conducting an informed assessment based on the specific facts of each engagement, including contractual terms and actual working practices. Agencies also have a responsibility to ensure determinations are passed correctly through the supply chain.

By implementing a structured IR35 check process, organisations demonstrate compliance with the law. Working with a specialist provider such as The Infinity Group helps ensure assessments are consistent, well-documented, and aligned with HMRC expectations.

Avoiding Blanket Determinations and Contractor Disputes

Many end clients and agencies are tempted to apply blanket inside IR35 decisions to reduce perceived risk. However, HMRC has made it clear that blanket determinations are not acceptable and can invalidate the status determination process.

Blanket decisions often lead to contractor dissatisfaction, disputes, and talent loss. Skilled contractors may refuse to work under inside IR35 arrangements, leaving organisations struggling to fill critical roles.

Carrying out individual IR35 checks allows businesses to make fair and accurate determinations. The Infinity Group helps organisations assess each engagement on its own merits, supporting compliant outside IR35 decisions where justified.

Supporting a Compliant and Transparent Supply Chain

IR35 compliance does not stop with the end client. Agencies play a key role in ensuring determinations are communicated correctly and that the correct party accounts for tax and National Insurance.

A robust IR35 check process improves transparency across the supply chain. Clear Status Determination Statements and documented reasoning help agencies and contractors understand their position and reduce confusion.

The Infinity Group works with both end clients and agencies to establish clear IR35 processes that promote collaboration and compliance throughout the supply chain.

Managing Status Determination Statements Correctly

Issuing a compliant Status Determination Statement is a legal requirement under the off-payroll rules. An SDS must state the IR35 outcome and explain the reasoning behind it. Failure to issue a valid SDS can result in the end client being deemed the fee payer and becoming liable for tax.

Many organisations underestimate the importance of the SDS or provide insufficient detail. A robust IR35 check supports the creation of clear, well-reasoned SDS documents.

The Infinity Group provides structured SDS support, ensuring documentation meets legal requirements and stands up to scrutiny.

Handling Disagreements and Appeals Professionally

Contractors have the right to challenge an IR35 determination, and end clients must respond within a defined timeframe. Poorly managed disputes can invalidate determinations and increase legal risk.

An effective IR35 check process includes a clear disagreement and appeals procedure. Independent review and transparent communication are key to resolving disputes fairly.

By working with The Infinity Group, organisations can manage IR35 disagreements professionally and consistently, protecting relationships and compliance.

Adapting to Changes in Working Practices

IR35 status is not static. Changes in role scope, management structure, or working arrangements can affect employment status. Failing to reassess IR35 status when changes occur can leave organisations exposed.

Regular IR35 checks ensure determinations remain accurate throughout the engagement lifecycle. This is particularly important for long-term contractor roles.

The Infinity Group supports ongoing IR35 monitoring and reassessment, helping UK organisations remain compliant as circumstances evolve.

Building Trust With Contractors and Agencies

Transparency and fairness in IR35 checks help build trust with contractors and agencies. Contractors are more likely to accept determinations when they understand the reasoning and see that reasonable care has been applied.

A clear and consistent IR35 check process enhances reputation and supports long-term workforce planning.

The Infinity Group’s independent approach helps organisations demonstrate objectivity and professionalism in their IR35 decisions.

Conclusion

An IR35 check is essential for UK end clients and agencies because it protects against financial risk, ensures legal compliance, and supports fair and transparent contractor engagement. With HMRC scrutiny increasing and contractor markets remaining competitive, getting IR35 right is more important than ever.

By implementing robust IR35 check processes and working with experienced specialists such as The Infinity Group, organisations can reduce risk, maintain access to skilled contractors, and operate with confidence in a complex regulatory environment.