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How to Be Outside IR35: Essential Tips for UK Contractors

📅 Published on February 25, 2025

As a UK contractor seeking to maintain your independence and tax efficiency, understanding how to be outside IR35 is crucial. This guide provides actionable strategies to help you establish and protect your outside IR35 status.

 

Understanding What Makes a Contract Outside IR35

Before diving into specific tactics, it's important to understand the key factors that HMRC examines when determining IR35 status:

  • Control: How much direction does the client have over your work?
  • Substitution: Can you send someone else to do the work in your place?
  • Mutuality of Obligation: Is there an expectation of ongoing work?

 

10 Practical Steps to Stay Outside IR35

 

1. Negotiate a Strong Contract

Your contract is your first line of defense. Ensure it includes:

  • Clear project deliverables rather than vague job descriptions
  • Explicit right of substitution clause
  • Defined end date with no guarantee of extension
  • No control clauses that suggest employment

Pro tip: Have your contract professionally reviewed before signing to identify and remove any problematic clauses.

 

2. Maintain the Right to Substitution

One of the strongest indicators of being outside IR35 is having a genuine right to send a substitute. To strengthen this:

  • Include substitution rights in your contract
  • Document instances where you've discussed potential substitutes
  • If possible, actually provide a substitute for some of your work

 

3. Control Your Working Practices

How you work day-to-day matters more than what's in your contract:

  • Set your own working hours when possible
  • Work remotely when you can
  • Avoid using client email addresses or business cards
  • Don't attend staff meetings unless necessary for project delivery
  • Decline staff benefits, training, and social events

 

4. Use Your Own Equipment

Whenever possible:

  • Use your own laptop, software, and tools
  • Maintain professional insurance policies
  • Invoice for your services rather than using timesheet systems

 

5. Work for Multiple Clients

Working for multiple clients simultaneously strengthens your case for being outside IR35:

  • Aim to have 2-3 clients at any given time
  • If not possible, maintain short contracts with breaks between them
  • Keep records of all client work to demonstrate a diverse client base

 

6. Create Financial Risk

True businesses bear financial risks that employees don't:

  • Include milestone-based payments in contracts rather than hourly rates
  • Add penalty clauses for late delivery
  • Consider fixed-price contracts where appropriate
  • Maintain professional indemnity insurance

 

7. Build Your Business Identity

Operate like a genuine business:

  • Create a professional company website
  • Use branded email addresses and business cards
  • Maintain separate business bank accounts
  • Register for VAT if appropriate
  • Invest in marketing your services

 

8. Document Everything

Keep detailed records of:

  • All communications with clients
  • Instances where you've fixed mistakes at your own expense
  • Times you've declined work or negotiated project terms
  • Separate working arrangements from permanent staff

 

9. Get Professional IR35 Status Determinations

Consider getting:

  • Contract reviews from IR35 specialists
  • Status determination statements from clients
  • Independent IR35 assessments before taking on new contracts

 

10. Stay Updated on IR35 Legislation

IR35 rules change regularly:

  • Subscribe to contractor news services
  • Join contractor forums and professional networks
  • Consider working with accountants who specialize in contractor taxation

 

Red Flags to Avoid

Be cautious of these arrangements that could trigger IR35 concerns:

  • Client providing all equipment and systems
  • Being named on the client's organizational chart
  • Having a client email address or phone extension
  • Required attendance at staff meetings
  • Being integrated into the client's team
  • Working exclusively for one client for years

 

Conclusion

Staying outside IR35 requires a deliberate approach to how you structure your contracts and conduct your business. By implementing these strategies, you can strengthen your position as a genuine independent contractor rather than a "disguised employee."

 

Remember that no single factor determines IR35 status – HMRC looks at the entire picture of your working arrangement. The more steps you take to establish your independence, the stronger your outside IR35 position will be.

 

Want personalized advice on your IR35 status? Consider speaking with an IR35 specialist who can review your specific situation and contracts.