IR35 for IT contractors

IT contracting is where most IR35 disputes are fought, largely because the working patterns that make a delivery team effective — daily stand-ups, shared backlogs, a client laptop on a client network — are also the patterns HMRC reads as employment. The job title decides nothing. What decides it is how you actually work, day to day.

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Why it is contested

What actually decides it for IT contractors

Two developers on the same client site, on the same rate, can land on opposite sides of the line. The difference is rarely the contract wording — it is whether the engagement is defined by a deliverable or by supplying a person to fill a seat. Agile delivery makes this genuinely hard: a backlog that is re-prioritised each sprint can look like an ongoing obligation to accept whatever work appears, which is precisely the mutuality question the Supreme Court addressed in PGMOL. Long-running renewals on the same team compound it.

Job titles decide nothing. There is no such thing as a role that is inherently inside or outside IR35. Status turns on the facts of a particular engagement, which is why two IT contractors on the same rate at the same client can land on opposite sides of the line.

The five HMRC factors

How each factor tends to play out

Including mutuality of obligation, which HMRC's own CEST tool leaves out despite the Supreme Court confirming its relevance in PGMOL.

Personal service & substitution

Most IT contracts carry a substitution clause; far fewer are genuinely usable. Security clearance, named-resource wording in the agency's contract with the client, or a client veto on who attends can make the right unexercisable in practice — and tribunals look at whether the right is real, not whether the clause exists.

Control

Being told what to build is normal for any supplier. Being told how to build it, which hours to be online, and which ticket to pick up next moves toward employment. Technical autonomy over implementation is the signal that matters most here.

Mutuality of obligation

The question is what happens when the current piece of work ends. If the client must find you more work and you must take it, that is mutuality. Rolling extensions with no defined deliverable are the common weak point — and CEST ignores this factor entirely.

Financial risk

Fixing defects in your own time at your own cost, carrying professional indemnity insurance, and providing your own equipment all evidence risk. Straight time-and-materials billing with no rework exposure evidences very little.

In business on own account

Several concurrent clients, your own tooling and licences, a company website and active marketing all point to a business. One client for three consecutive years, with a client email address and a line on the org chart, points the other way.

Signals to check

Which way does your engagement point?

Tends toward outside

The contract is for a defined deliverable or statement of work, not an open-ended seat
You decide the technical approach and your own working hours
You use your own hardware and development tooling where security policy permits
You carry your own professional indemnity cover and fix your own defects unpaid
You have run concurrent engagements with other clients

Tends toward inside

You are in the client's line-management chain and attend their internal staff processes
Work is assigned ticket by ticket with no defined end deliverable
Your substitution right is blocked by security clearance or named-resource wording
You have been on the same team through repeated renewals with no scope change
You receive employee-style benefits, a client email address or an internal job title

These are indicators, not a scoring system — no single signal decides status, and a case is judged on the overall picture. The free check weighs all five factors together and tells you how confident it is.

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IT contractor IR35 questions

Does having a substitution clause make me outside IR35?

Not on its own. Tribunals look at whether the right to send a substitute is genuine and usable in practice, not whether a clause appears in the contract. If security clearance, a named-resource term in the upper contract, or a client veto means you could never actually send anyone, the clause carries little weight. A substitution that has actually been exercised is far stronger evidence than one that only exists on paper.

I work in an agile team with daily stand-ups. Does that put me inside IR35?

Not by itself. Attending stand-ups is ordinary coordination between a supplier and a client, and plenty of genuinely independent suppliers do it. What matters more is whether the client directs how you do the work, whether you are obliged to accept whatever the backlog produces next, and whether the engagement has a defined deliverable. Agile working makes the mutuality question harder to answer, which is why it deserves a careful look rather than an assumption either way.

Does working through an agency change my IR35 status?

It does not change the underlying test, but it changes who decides and who carries the risk. For engagements with medium and large clients, the end client makes the determination and issues an SDS, and the fee-payer in the chain — often the agency — operates PAYE if the result is inside. The agency's contract with the client also matters to your case: terms you never see, such as a named-resource clause, can undercut a substitution right your own contract appears to give you.

For the full picture — the three-limb test, the case law and how determinations work — read the complete IR35 guide.

Other roles

IR35 for locum doctors IR35 for management consultants IR35 for interim managers

Find out where you actually stand

Ten plain-English questions about how you really work. A clear inside or outside verdict with the reasoning behind it, in minutes — free, no card and no login.

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Nebula is decision-support, not tax or legal advice, and no IR35 determination is legally binding — not even HMRC's own CEST. Borderline results are flagged with a recommendation to have a qualified IR35 specialist review them.