IR35: explained with an example - Featured Image

IR35: explained with an example

Determining the IR35 status of an assignment can be complex, as there’s many variables to consider including Control, Substitution and Mutuality of Obligations.

An example

To help illustrate the differences between self-employed and employed, we’ve put together an easy example below.

Kate would be considered self-employed for this contract.

Kate is taken on by a pharmaceutical company (end client) to design and build an app. Kate and the client agree a price, timeline and scope for the project. Kate will work from home, using her own equipment to complete the task. Kate is free to work with other clients but faces a contractual penalty if work isn’t delivered on time, to the agreed standard.


Dave would be considered an employee for this contract.

The pharmaceutical company hires Dave to maintain the app. He works at the firm twice a week, eight hours a day. They give him a laptop he can use in the office, or at home with permission. The company pays for all of the software used by Dave. Dave reports to the Marketing team and must follow company guidelines and procedures. Dave is paid for any overtime required and can also work elsewhere on days he is not working.


So what’s the difference?

Looking at these two examples, you can easily see the difference in Control, Substitution and Mutuality of Obligations. Whereas Kate is free to complete the project without supervision and in her own time as long as she meets the agreed deadline, Dave has to abide by set working hours by the same company. Dave’s company also provides his equipment and software, whereas Kate needs to use her own.

If you need help deciding the status of an assignment, or your own employment status, please contact our team for free, no obligation advice.

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