What an IR35 Contractor Tax Accountant Checks Before You Sign

Why the Contract Needs an IR35 Review Before You Accept It

An IR35 Contractor Tax Accountant does more than look at the hourly or daily rate. Before you sign a contractor agreement, they examine whether the proposed engagement could fall within the UK off payroll working rules and whether the contractual terms genuinely reflect the way you will work.

An IR35 Contractor Tax Accountant will normally want to see the proposed contract, understand who the client is, identify the parties in the contractual chain and establish who is responsible for making the employment status determination. This matters because IR35 can affect how Income Tax and National Insurance are calculated and who must operate PAYE.

For medium and large private sector clients, and public sector engagements, the client is generally responsible for determining status and issuing a Status Determination Statement. For a small private sector client, responsibility normally remains with the contractor’s intermediary, such as the contractor’s limited company.

Whether the Client Is Responsible for the IR35 Decision

The accountant first establishes the client's size and sector.

This is important because the rules are not identical for every contractor. A limited company contractor working for a large private sector organisation can be treated differently from someone providing services to a small private company.

The accountant may check:

• Whether the client is in the public sector

• Whether the private sector client qualifies as small

• Whether an agency sits between the contractor and client

• Who the fee payer is

• Whether an SDS has been provided

The contractual supply chain can materially affect who operates PAYE and National Insurance. HMRC states that the off payroll rules apply on a contract by contract basis, rather than automatically to every engagement undertaken by a contractor.

What the Written Contract Actually Says

The accountant carefully reads the wording rather than relying on the job title.

A contract calling you a “self employed consultant” does not, by itself, establish self employment. HMRC considers the contractual terms alongside the actual working relationship.

Particular attention is given to provisions covering:

• Services to be provided

• Working hours

• Place of work

• Supervision

• Notice periods

• Termination

• Substitution

• Equipment

• Payment arrangements

• Responsibility for correcting defective work

A well drafted contract should describe a genuine business to business relationship where that reflects reality. However, changing wording simply to create an appearance of being outside IR35 does not solve an underlying employment relationship.

Whether You Have a Genuine Right of Substitution

Substitution is one of the areas I would examine closely before advising a contractor to sign.

The question is not simply whether the contract contains the words “right of substitution”. The practical question is whether you genuinely have the ability to send another suitably qualified person to perform the work.

HMRC's employment status guidance considers personal service and substitution when assessing status. If the contractor must personally provide the work and has no meaningful right to provide a substitute, that can point towards employment.

A useful review therefore asks:

• Can you appoint a substitute?

• Can the client reject that person, and on what grounds?

• Who pays the substitute?

• Have you realistically been able to exercise the right?

• Does the commercial arrangement make substitution credible?

A theoretical substitution clause that could never realistically operate deserves careful scrutiny.

How Much Control the Client Has

Control is another major part of an IR35 review.

The accountant examines not only what the contract says but also how the engagement is expected to operate. HMRC considers control over what the worker does, how the work is performed, when it is performed and where it is performed.

For example, imagine a software contractor engaged to deliver a defined technical project. The contractor decides the methodology, manages the work and is judged primarily against agreed deliverables.

That may look different from an arrangement where the contractor works fixed employee style hours, reports continuously to a line manager, follows detailed instructions and performs the same duties as permanent employees.

The distinction is often found in the practical working arrangements rather than a single clause.

Whether There Is Mutuality of Obligation

The accountant also considers mutuality of obligation.

At its basic level, there must be an obligation for the engager to provide remuneration and an obligation for the worker to provide work or skill before there can be a contract to examine for employment status. HMRC's updated guidance confirms these basic requirements.

The accountant will therefore consider whether the client is obliged to offer continuing work and whether you are obliged to accept it.

This does not mean that every contract containing continuing obligations is automatically inside IR35. It is one factor considered alongside personal service, control and the wider circumstances.

Whether the Agreed Rate Makes Commercial Sense

An accountant should calculate the financial effect of the proposed status rather than looking only at the headline contractor rate.

Suppose a contractor is offered £600 per day. The apparent annual figure may look attractive, but the accountant will consider unpaid holidays, gaps between contracts, pension costs, professional insurance, accountancy fees, business expenses and the possible tax treatment.

For 2026/27, the standard Personal Allowance is £12,570. In England, Wales and Northern Ireland, the basic Income Tax rate is 20% on taxable income up to £37,700, with 40% applying above that band up to £125,140 and 45% above that level. Scotland has different Income Tax bands.

The calculation therefore needs to reflect the contractor's entire personal and company position, rather than treating the contract rate as disposable income.

Whether PAYE and National Insurance Could Apply

If the engagement is determined to be inside the off payroll rules, the fee payer generally becomes responsible for deducting Income Tax and employee National Insurance through PAYE and accounting for employer National Insurance where applicable.

For 2026/27, most employees pay Class 1 National Insurance at 8% between £1,048 and £4,189 per month, reducing to 2% above £4,189 per month.

This can significantly change the amount reaching the contractor's limited company and ultimately the contractor personally.

That is why an accountant should model the engagement before the contract is signed rather than discovering the financial impact after several invoices have been raised.

Checking the Status Determination Statement

Where the client is responsible for the determination, the accountant should examine the Status Determination Statement carefully.

The SDS should communicate the client's conclusion and the reasons supporting it. HMRC guidance also makes clear that clients must take reasonable care and should not simply apply a blanket IR35 decision to every contractor regardless of individual circumstances.

A contractor should ask questions if:

• The SDS appears inconsistent with the contract

• The reasoning is extremely brief

• The client has ignored important working arrangements

• The determination appears to have been applied automatically

• The actual engagement differs from the assumptions used

Where appropriate, the contractor can use HMRC's Check Employment Status for Tax tool alongside professional advice. HMRC states that it will stand by a CEST result where the information supplied is accurate and consistent with its guidance.

Reviewing the Commercial Risk in the Contract

IR35 is only one part of the pre contract review.

An experienced accountant will also look for provisions that could create unexpected financial exposure. These can include unusually long payment periods, unlimited liability, restrictive termination provisions, extensive unpaid obligations or requirements that resemble those applying to employees.

The accountant may also ask whether professional indemnity insurance is required, whether the contractor bears genuine financial risk and who pays for correcting defective work.

These details help establish whether the arrangement operates like an independent business or resembles employment.

Checking Your Wider Tax Position Before Signing

Finally, the accountant considers how the new contract fits into your existing tax affairs.

For a limited company contractor, this may include:

• Existing salary and dividend arrangements

• Corporation Tax obligations

• Personal Self Assessment

• Pension contributions

• Business expenses

• Other concurrent contracts

• P45 and P60 information where relevant

• Payments already received during the tax year

This matters because an IR35 determination can affect more than one month's payroll.

For comparison, a genuinely self employed individual may have Class 4 National Insurance exposure. For 2026/27, Class 4 NIC is 6% on profits between £12,570 and £50,270 and 2% above £50,270.

The accountant therefore compares the expected tax treatment under the proposed engagement with the contractor's wider financial position.

A useful pre-contract review should leave you knowing not only whether the arrangement is likely to be affected by IR35, but also what the determination could mean for your cash flow, payroll, company profits and personal tax position.