IR35 legislation remains one of the most challenging areas of tax compliance for contractors, agencies, and end clients in the UK. An IR35 check is designed to determine whether a contractor is genuinely self-employed or should be treated as an employee for tax purposes. When carried out incorrectly, IR35 checks can expose businesses and contractors to significant financial and legal risks. Understanding the most common mistakes made during an IR35 check, and how to avoid them, is essential for staying compliant with HMRC rules.

Failing to Understand What an IR35 Check Involves

One of the most common mistakes is a lack of understanding of what an IR35 check actually assesses. An IR35 check is not simply a review of a job title or contract rate. It examines the reality of the working relationship between the contractor and the end client.

Key factors such as control, substitution, and mutuality of obligation must be considered. Businesses that treat IR35 as a tick-box exercise often overlook these critical elements, leading to incorrect determinations. To avoid this, all parties involved should understand the legal principles behind IR35 before carrying out any assessment.

Relying Solely on Contract Wording

Another frequent mistake is relying only on the written contract when conducting an IR35 check. While contracts are important, HMRC places equal, if not greater, emphasis on actual working practices.

A contract may state that a contractor has the right to substitute, but if substitution has never been used or would not realistically be accepted, HMRC may disregard that clause. To avoid this issue, IR35 checks should always consider how the contractor works in practice, not just what is written on paper.

Using HMRC’s CEST Tool Incorrectly

The Check Employment Status for Tax (CEST) tool is widely used in the UK, but it is often misunderstood or misused. Incorrect answers, lack of supporting evidence, or incomplete information can result in unreliable outcomes.

Some businesses assume that using the CEST tool alone guarantees compliance, which is not always the case. To avoid mistakes, the tool should be completed carefully, with accurate input from those who understand the role and working arrangements. Professional support, such as that offered by The Infinity Group, can help ensure the tool is used correctly and results are properly interpreted.

Ignoring Working Practices After the IR35 Check

IR35 compliance does not end once a status determination has been made. A common mistake is failing to monitor working practices after an IR35 check is completed.

Roles and responsibilities can change over time, especially on long-term projects. If working practices drift away from the original assessment, the IR35 status may no longer be valid. Regular reviews and clear communication between contractors and end clients help prevent this issue and maintain compliance.

Not Issuing a Proper Status Determination Statement

Under IR35 rules, end clients are required to issue a Status Determination Statement explaining the decision and the reasons behind it. Some businesses fail to issue this statement correctly or provide vague explanations.

This can lead to disputes and increased scrutiny from HMRC. To avoid this mistake, status determinations should be clearly documented, well reasoned, and shared with all relevant parties. Transparency is key to demonstrating reasonable care.

Lack of Evidence to Support the IR35 Check

Another major mistake is failing to retain evidence to support an IR35 check. HMRC may request proof of how a determination was reached, especially during an investigation.

Without documentation such as contracts, working practice descriptions, correspondence, and assessment records, businesses may struggle to defend their position. Keeping detailed records and maintaining an audit trail is essential to avoid penalties and disputes.

Misunderstanding Responsibility for IR35 Checks

Since the IR35 reforms, responsibility for carrying out IR35 checks has shifted in many cases to end clients and agencies. A common mistake is assuming that the contractor is still fully responsible in all situations.

Medium and large end clients in the private sector are responsible for determining IR35 status. Failure to accept this responsibility can result in non-compliance and financial liability. Clear understanding of who is responsible at each stage helps avoid costly errors.

Treating All Contractors the Same

Some organisations adopt a blanket approach, placing all contractors inside IR35 to reduce risk. While this may seem convenient, it is considered poor practice by HMRC and can lead to disputes and talent loss.

Each IR35 check must be role-specific and based on individual circumstances. Avoiding blanket decisions and carrying out fair, role-based assessments demonstrates reasonable care and reduces compliance risk.

Overlooking Mutuality of Obligation

Mutuality of obligation is one of the most misunderstood aspects of an IR35 check. Many assessments focus heavily on control and substitution while ignoring whether there is an obligation for ongoing work and acceptance.

Failing to consider this factor can lead to incorrect determinations. A proper IR35 check should assess whether the client is obliged to offer work and whether the contractor is obliged to accept it beyond the agreed contract terms.

Not Seeking Professional Advice

IR35 legislation is complex, and attempting to manage it without expert support is a common mistake. Businesses and contractors who rely solely on internal knowledge may overlook key risks or misinterpret guidance.

Professional advisors bring experience, up-to-date knowledge, and an objective perspective. The Infinity Group supports UK businesses and contractors by providing expert guidance on IR35 checks, helping reduce risk and ensure compliance with HMRC expectations.

Failing to Communicate With Contractors

Poor communication during the IR35 check process can create confusion, mistrust, and disputes. Contractors should be involved in discussions about their working arrangements and given the opportunity to provide input.

Clear communication helps ensure assessments are accurate and reduces the likelihood of challenges. It also supports positive working relationships and smoother compliance processes.

Ignoring the Right of Appeal

Contractors have the right to challenge an IR35 determination. A common mistake is failing to put a proper disagreement process in place or ignoring contractor concerns.

Businesses should have a clear process for reviewing challenges and responding within the required timeframe. Taking appeals seriously demonstrates reasonable care and reduces the risk of escalation.

How to Avoid These IR35 Check Mistakes

Avoiding mistakes during an IR35 check starts with understanding the legislation and applying it correctly. Assessments should be role-specific, evidence-based, and reflective of actual working practices. Documentation, regular reviews, and clear communication are all essential.

Using professional support can significantly reduce risk. The Infinity Group provides expert assistance with IR35 checks, helping businesses and contractors navigate complex requirements with confidence.

Conclusion

IR35 checks are a critical part of compliance for contractors, agencies, and end clients in the UK. Common mistakes such as relying solely on contracts, misusing the CEST tool, ignoring working practices, and failing to keep evidence can lead to serious consequences.

By understanding these pitfalls and taking proactive steps to avoid them, businesses can demonstrate reasonable care and reduce their exposure to HMRC penalties. Working with experienced advisors like The Infinity Group ensures IR35 checks are carried out accurately, transparently, and in line with current UK regulations, providing peace of mind in an increasingly complex compliance landscape.