HMRC IR35 checks are a growing concern for UK businesses, contractors, and recruitment agencies. As HMRC continues to increase enforcement activity around off-payroll working rules, more organisations are finding themselves subject to IR35 reviews. These checks aim to determine whether contractors have been correctly assessed as inside or outside IR35 and whether the appropriate tax treatment has been applied. Understanding the most common issues identified during HMRC IR35 checks is essential for reducing risk and maintaining compliance.

Lack of Reasonable Care in IR35 Assessments

One of the most frequent issues identified during HMRC IR35 checks is the failure to demonstrate reasonable care. HMRC expects end clients to take a considered and well-documented approach when determining a contractor’s employment status.

Relying on assumptions, rushing assessments, or using incomplete information can lead HMRC to conclude that reasonable care was not taken. This can result in the transfer of tax liability back to the end client, even if an agency or umbrella company is involved.

Over-Reliance on the CEST Tool

Many businesses rely heavily on HMRC’s Check Employment Status for Tax tool when carrying out IR35 assessments. While the tool is useful, HMRC IR35 checks often reveal that it has been used incorrectly or without sufficient supporting evidence.

Entering inaccurate information or failing to consider real working practices can lead to incorrect determinations. HMRC may challenge outcomes that appear inconsistent with the actual engagement. Combining CEST with expert review, as offered by The Infinity Group, helps produce more robust and defensible results.

Blanket IR35 Determinations

Issuing blanket inside IR35 or outside IR35 determinations is a major red flag during HMRC IR35 checks. HMRC has clearly stated that each engagement must be assessed individually, even where roles appear similar.

Blanket decisions suggest a lack of proper assessment and often lead HMRC to scrutinise all contractor engagements more closely. Individual assessments demonstrate reasonable care and significantly reduce compliance risk.

Contracts That Do Not Reflect Working Practices

Another common issue identified during HMRC IR35 checks is inconsistency between contractual terms and actual working practices. HMRC places significant weight on how the contractor operates in reality, not just what the contract states.

For example, a contract may include a right of substitution, but if substitution is never allowed in practice, HMRC may disregard the clause. Accurate IR35 assessments must consider day-to-day working arrangements, including control, supervision, and integration into the business.

Poor or Missing Status Determination Statements

Status Determination Statements are a legal requirement under IR35 rules. HMRC IR35 checks often uncover SDS documents that are incomplete, poorly reasoned, or not issued at all.

An SDS must clearly state the IR35 status and explain the reasoning behind the decision. Failure to issue a compliant SDS can result in the end client being held liable for unpaid tax and National Insurance Contributions.

Inadequate Documentation and Audit Trails

HMRC expects businesses to retain clear records supporting IR35 determinations. During checks, HMRC frequently identifies poor documentation or missing evidence.

Without proper records, businesses struggle to defend their decisions. Maintaining an audit trail that includes contracts, assessments, working practice reviews, and communication records is essential. Providers such as The Infinity Group help businesses implement structured documentation processes to support HMRC compliance.

Failure to Review IR35 Status Over Time

IR35 status is not static. Changes to a contractor’s role, responsibilities, or working arrangements can affect employment status.

HMRC IR35 checks often identify cases where status has not been reviewed despite contract extensions or changes in working practices. Regular reviews help ensure determinations remain accurate and defensible.

Misunderstanding Control and Supervision

Control is a key factor in IR35 assessments. HMRC frequently identifies misunderstandings around who controls how, when, and where work is done.

If contractors are closely supervised, follow internal policies, or are treated like employees, HMRC may view the engagement as inside IR35. Accurate assessments must carefully consider the level of autonomy and independence in the working arrangement.

Integration into the End Client’s Business

Another issue commonly highlighted during HMRC IR35 checks is contractor integration. Contractors who are heavily integrated into an organisation, attend internal meetings, manage staff, or use employee benefits may be viewed as employees for tax purposes.

Assessments must evaluate whether the contractor is genuinely operating as an independent supplier or functioning as part of the internal workforce.

Lack of Dispute Resolution Process

HMRC requires end clients to have a clear process for handling disputes raised by contractors regarding IR35 determinations. During checks, HMRC often identifies businesses that lack a formal dispute resolution procedure.

Failing to respond to disputes within the required timeframe can result in non-compliance. A documented and timely process demonstrates reasonable care and adherence to IR35 rules.

Incorrect Allocation of Liability

Confusion over who is responsible for tax liability is another common issue. HMRC IR35 checks frequently uncover cases where businesses assume liability sits elsewhere without proper contractual or procedural support.

Understanding the roles of end clients, agencies, and umbrella companies is essential. Clear agreements and compliant processes help prevent unexpected liabilities.

Financial Exposure and Penalties

HMRC IR35 checks often result in significant financial exposure for businesses that have made errors. Unpaid Income Tax, National Insurance Contributions, interest, and penalties can add up quickly.

Businesses that fail to identify and address issues proactively may face retrospective tax bills covering multiple years.

How Professional Support Reduces HMRC IR35 Risks

Professional IR35 support helps businesses address the issues commonly identified during HMRC checks. Expert-led assessments, clear documentation, regular reviews, and compliance-focused processes significantly reduce risk.

The Infinity Group provides specialist IR35 check services designed to meet HMRC expectations. Their approach focuses on accuracy, transparency, and ongoing compliance support for UK businesses.

Preparing for HMRC IR35 Checks

Preparation is key to successfully navigating HMRC IR35 checks. Businesses should review existing determinations, update documentation, and ensure dispute resolution processes are in place.

Working with experienced providers such as The Infinity Group ensures that IR35 processes are robust, defensible, and aligned with current legislation.

Conclusion

HMRC IR35 checks commonly identify issues such as lack of reasonable care, blanket determinations, poor documentation, and misunderstandings of working practices. These issues expose UK businesses to significant financial and legal risk.

By understanding these common problem areas and taking proactive steps to address them, organisations can strengthen their IR35 compliance. Partnering with a trusted provider like The Infinity Group helps businesses navigate HMRC IR35 checks with confidence, reduce risk, and maintain compliant contractor engagements across the UK.