IR35 for Employers Hiring IT Contractors in 2026

An IR35 determination affects the tax treatment of an IT contractor engagement and the responsibilities carried by the organisations within the supply chain. It should be considered while the assignment is being defined, because the decision needs to reflect the contractual terms and the way the work will operate in practice.

The off-payroll working rules are applied to each contract individually. Where a contractor provides services through their own intermediary and would have been treated as an employee for tax purposes if engaged directly, the rules may apply.

This guide explains the practical responsibilities employers should understand before taking an IT contractor requirement to market. Talent Today can help clients describe the assignment clearly and understand how its proposed terms may affect contractor interest, but we do not make status determinations or provide legal or tax advice.

What IR35 Means for an IT Contractor Engagement

The off-payroll working rules consider whether the contractor would have been an employee for tax purposes if they had provided their services directly to the client. The assessment applies to the individual contract and should reflect the working arrangement that will exist during the assignment.

Where the contractor is determined to be employed for tax purposes, the organisation acting as the deemed employer must deduct Income Tax and employee National Insurance contributions. It must also account for employer National Insurance contributions and the Apprenticeship Levy where applicable.

This tax treatment does not, by itself, make the contractor an employee of the client or give them employment rights from that client. It determines how payments under the engagement are treated for tax.

Who Is Responsible for the IR35 Determination?

The off-payroll working rules may be relevant when an individual provides services through their own intermediary, usually a personal service company. Responsibility for determining employment status depends on the type and size of the client.

Public-Sector Clients

The client is responsible for determining the contractor’s employment status for tax and communicating that decision through a Status Determination Statement.

Medium and Large Private or Voluntary-Sector Clients

The client is also responsible for the determination where it meets the relevant size conditions.

Small Private or Voluntary-Sector Clients

Where the client qualifies as small, responsibility normally remains with the contractor’s intermediary. The client should confirm its size if asked by the contractor or another organisation in the labour supply chain.

Client size and overseas arrangements can require closer examination. Employers that are uncertain about their position should consult HMRC guidance or obtain appropriate professional advice before the assignment begins.

HMRC Guidance

What Employers Need to Do When the Rules Apply

Where the client is responsible for the determination, the process should be completed with enough care to support the conclusion reached. A general policy applied to every contractor is unlikely to reflect the individual assignment.

Assess the Actual Engagement

The assessment should consider the contractual terms and how the work will operate in practice. HMRC’s Check Employment Status for Tax tool can be used to support this process, although employers may also use other appropriate assessment methods.

Take Reasonable Care

The client must take reasonable care when reaching the decision. This involves considering the particular facts of the engagement and retaining information that explains how the conclusion was reached.

Issue a Status Determination Statement

The client should provide a Status Determination Statement that records the outcome and the reasons for it. The statement must be passed to the contractor and to the organisation the client contracts with in the labour supply chain.

Keep the Working Arrangement Consistent

The way the assignment operates should reflect the terms considered during the assessment. If the responsibilities or working practices change materially, the determination may need to be reviewed.

Inside and Outside IR35 Engagements

The terms “inside IR35” and “outside IR35” describe the tax treatment of a particular contractor engagement. They should follow from the assessment rather than being selected as a preference before the assignment has been considered.

Inside IR35

An inside IR35 determination means the contractor would be treated as an employee for tax purposes if engaged directly. The deemed employer deducts Income Tax and employee National Insurance contributions from the relevant payment and accounts for employer National Insurance contributions and the Apprenticeship Levy where applicable.

The contractor does not automatically receive employment rights from the client as a result of this tax treatment.

Outside IR35

An outside IR35 determination means the contractor is treated as self-employed for tax purposes for that engagement. Payments are made to the contractor’s intermediary without the deemed-employment deductions, and the intermediary remains responsible for its tax obligations.

The contract and the day-to-day working arrangement must support the determination throughout the assignment.

How IR35 Status Affects the Contractor Market

Contractors consider the IR35 determination alongside the day rate, scope of work and proposed working arrangement. An inside IR35 position can affect the rate a contractor is prepared to accept because of the tax treatment. Some contractors may also choose to consider only outside IR35 assignments, which reduces the available market.

An outside IR35 label will attract its own scrutiny. Experienced contractors will look at whether the contract and the way the client intends to manage the work are consistent with an independent engagement. If the description of the assignment conflicts with the stated determination, questions are likely to arise before the contractor agrees to proceed.

Communicating the position and the reasoning early allows contractors to assess the opportunity properly. It also reduces the risk of disagreement or withdrawal later in the hiring process.

it contract recruiter in IR35 meeting with client

Common IR35 Mistakes During Contractor Hiring

Applying the Same Decision to Every Contractor

Assignments carrying similar titles can operate in different ways. Each contract should be considered on its own facts rather than placed inside or outside IR35 through a general policy.

Deciding the Status Too Late

Leaving the assessment until a contractor has been selected can create uncertainty around the rate and engagement terms. The proposed position should be understood before the requirement reaches the market.

Relying on the Contract Alone

Written terms are important, but the assessment must also reflect how the work will operate. A contract describing independence will carry little weight if the client intends to manage the contractor in a contradictory way.

Giving an Outcome Without Reasons

A Status Determination Statement must explain why the decision was reached. Recording only “inside” or “outside” does not provide the reasoning required.

Failing to Pass the Statement Through the Supply Chain

The client should give the statement to the contractor and the organisation it contracts with. Failing to pass it on can leave the client responsible for obligations that would otherwise sit elsewhere in the chain.

Having No Process for Disagreements

The contractor or deemed employer may challenge the determination. The client needs a process for considering the representations and responding within the required timescale.

EXPLORE IT CONTRACTOR RECRUITMENT

Managing IR35 Within the Contractor Search

Before approaching contractors, we ask the client to confirm the proposed IR35 position and the terms that will shape the engagement. This allows the opportunity to be described accurately and gives contractors the information they need to decide whether the assignment is suitable.

We can explain how the stated position is being received in the market, including any effect on rate expectations or the size of the available contractor population. Where contractors consistently raise concerns about the relationship between the determination and the proposed working arrangement, we give the client a clear account of that feedback.

Talent Today does not replace the client’s assessment or advise that an engagement should be labelled inside or outside IR35. Our role is to support an informed contractor search once the appropriate determination has been made.

Discuss an IT Contractor Requirement

Tell us about the assignment, the experience required and the proposed engagement terms. We will discuss current contractor availability and how the confirmed IR35 position may affect the rate, market response and structure of the search.

Discuss a CONTRACTOR requirement