IR35 legislation is one of the most significant tax regulations affecting contractors in the UK. Designed to prevent disguised employment, IR35 ensures that individuals operating through intermediaries, such as personal service companies, pay the correct Income Tax and National Insurance contributions. IR35 checks are the process used to determine whether a contractor falls inside or outside the legislation. While these checks are essential for compliance, mistakes are common and can have serious financial consequences. Understanding these errors and how to avoid them is crucial for contractors, agencies, and end clients alike.

What Is an IR35 Check

An IR35 check involves assessing a contractor’s working arrangement to determine whether it should be treated as employment for tax purposes. HMRC considers both the contract and the actual working practices. The check looks at key factors such as control, substitution, mutuality of obligation, financial risk, and integration into the client’s business.

Contractors, agencies, and end clients must ensure that these checks are conducted accurately. A wrong determination can result in HMRC penalties, backdated taxes, and increased scrutiny of past contracts. Providers like The Infinity Group assist businesses and contractors in performing compliant IR35 checks, reducing risk and ensuring confidence in determinations.

Mistake 1: Relying Solely on Written Contracts

One of the most common errors during an IR35 check is assuming that the written contract alone determines status. While contracts are important, HMRC focuses heavily on actual working practices.

For example, a contract may state that the contractor has the right to provide a substitute, but if in practice the contractor never exercises this right, HMRC may treat the role as inside IR35. Similarly, control clauses in contracts must reflect the real level of control exercised by the client.

Avoiding this mistake requires documenting working practices and ensuring contracts accurately reflect the real working arrangement. The Infinity Group reviews both contracts and day-to-day practices to provide a robust, defensible IR35 determination.

Mistake 2: Ignoring Mutuality of Obligation

Mutuality of obligation (MOO) is another factor frequently misunderstood in IR35 checks. MOO examines whether the client is obliged to provide work and whether the contractor is obliged to accept it. High levels of mutuality may indicate employment status, placing the engagement inside IR35.

Contractors and clients sometimes overlook this factor, assuming that occasional short-term engagements automatically count as self-employment. Avoid this mistake by assessing all aspects of the working relationship, including project continuity and obligations under the contract. Professional guidance ensures MOO is evaluated accurately.

Mistake 3: Overlooking Substitution Rights

The right to provide a substitute is a critical factor in determining outside IR35 status. Many contractors fail to exercise or document their substitution rights, weakening their case for being outside IR35.

Even if a contract allows substitution, HMRC expects the right to be genuine and enforceable. Simply stating the right without ever using it can lead HMRC to treat the contractor as inside IR35. Maintaining records of any substitutions and ensuring the right is real and operational helps avoid this common pitfall.

Mistake 4: Misunderstanding Control

Control is a major focus in IR35 assessments. HMRC considers who dictates how, when, and where the contractor performs work. High levels of supervision or rigid schedules can indicate employment.

A common mistake is underestimating the impact of informal practices, such as mandatory client meetings or regular progress reports. Even minor signs of control can influence the assessment. Avoid this by clearly defining responsibilities, demonstrating autonomy, and documenting working practices to reflect real independence.

Mistake 5: Not Keeping Evidence of Working Practices

Another frequent error is failing to maintain evidence that supports the IR35 status. Contracts alone are insufficient; HMRC may request proof of how work was delivered in practice.

Good evidence includes emails, project plans, timesheets, communications showing autonomy, and records of financial risk or substitution. Professional services like The Infinity Group help contractors and clients maintain robust records that strengthen IR35 determinations.

Mistake 6: Relying Exclusively on HMRC CEST Tool

The Check Employment Status for Tax (CEST) tool is provided by HMRC to assist with IR35 checks. While useful, it has limitations and does not consider every nuance of real-world arrangements.

Relying solely on CEST without a comprehensive review of contracts and working practices can lead to inaccurate assessments. Contractors and businesses should use CEST as a starting point and supplement it with professional analysis. The Infinity Group provides expert IR35 evaluations that go beyond CEST to ensure full compliance.

Mistake 7: Failing to Review Changes in Working Arrangements

IR35 status is not static. Changes in responsibilities, work location, client control, or project scope can all impact whether a contractor falls inside or outside IR35.

A common mistake is assuming that a previous determination remains valid indefinitely. Regular reviews of contracts and working arrangements are essential. Professional providers like The Infinity Group offer ongoing support to review and update IR35 status whenever necessary.

Mistake 8: Not Understanding Who Is Responsible

Responsibility for IR35 checks depends on the sector and size of the client. In the public sector and large private sector organisations, the end client is responsible for determining IR35 status. Small private sector clients may leave responsibility with the contractor.

Misunderstanding this can lead to compliance gaps, with contractors or clients unaware of their obligations. Clarifying responsibilities and obtaining a clear Status Determination Statement helps avoid disputes and errors.

Mistake 9: Ignoring Financial Risk

Financial risk is an important indicator in IR35 checks. Contractors genuinely at risk of profit or loss are more likely to be outside IR35. Many contractors fail to highlight or document any financial risk they take on, such as providing materials or incurring expenses.

Documenting financial responsibilities and showing independent investment in projects strengthens a contractor’s position and demonstrates genuine self-employment. Professional guidance ensures this evidence is correctly presented.

Mistake 10: Not Seeking Professional Support

Finally, many contractors and clients attempt to handle IR35 checks without expert advice. Given the complexity and evolving nature of IR35 legislation, this is a high-risk approach. Mistakes can lead to backdated tax liabilities, interest, and penalties.

The Infinity Group provides specialist IR35 services for contractors, agencies, and end clients. Their expertise ensures accurate assessments, compliant documentation, and guidance on mitigating tax risk. Working with a professional reduces uncertainty and provides peace of mind.

How to Avoid IR35 Mistakes

Avoiding common IR35 mistakes involves a combination of contract review, evidence gathering, ongoing monitoring, and professional support. Key steps include:

• Ensuring contracts accurately reflect working practices

• Documenting control, substitution rights, and mutual obligations

• Keeping records of working arrangements, communications, and financial risks

• Using IR35 tools as a guide but not the sole assessment method

• Reviewing arrangements regularly, particularly after changes in project scope or responsibilities

• Seeking guidance from experienced providers like The Infinity Group

Conclusion

IR35 checks are essential for contractors, agencies, and end clients in the UK construction and consultancy sectors. However, mistakes during these checks are common and can result in significant financial and administrative consequences. Understanding the typical errors—from relying solely on contracts to failing to document working practices—allows businesses and contractors to take proactive steps toward compliance.

Professional support from providers such as The Infinity Group ensures IR35 checks are accurate, defensible, and compliant with HMRC requirements. By combining expertise, thorough documentation, and ongoing monitoring, contractors and businesses can navigate IR35 confidently, reduce risk, and protect their income.