How to Read a Contractor Agreement for IR35 Clauses

How to read a contractor agreement for IR35-relevant clauses

Before signing any new engagement, most limited-company contractors will be handed a contract running to several pages, often with the IR35-relevant terms buried in schedules or boilerplate. Knowing what to look for makes reviewing a contractor agreement for IR35 purposes far more manageable, and helps you have an informed conversation with a specialist before you sign.

This guide walks through the key clauses in an outside IR35 contract that tend to matter most, based on current HMRC and GOV.UK guidance. It is not a substitute for a professional contract review, but it should help you ask the right questions.

Why the wording of the contract is only part of the picture

HMRC is clear that the off-payroll working rules are applied on a contract-by-contract basis, and that the same worker could have one engagement inside the rules and another outside them, depending on the specific terms and how they operate in practice (GOV.UK: Understanding off-payroll working (IR35)). A contract does not even have to be written down: HMRC notes it can be written, verbal, or implied (GOV.UK: Understanding off-payroll working (IR35)).

Crucially, HMRC states that when it looks into a case, it examines the written contract between the intermediary and the client (and the agency-client contract where one exists), but it also looks at how those terms actually operate in practice (GOV.UK: IR35 enquiry by HM Revenue and Customs). HMRC is blunt about the implication: there is no such thing as an IR35-proof contract (GOV.UK: IR35 enquiry by HM Revenue and Customs). A beautifully drafted substitution clause that is never honoured in reality will not carry the weight a contractor might hope.

HMRC's own guidance on making status determinations goes further, warning that written terms may not reflect the true agreement between the parties, particularly where the contract lacks sufficient detail (GOV.UK: Making status determinations, part 8). This is the single most important point when reviewing a contractor agreement for IR35 purposes: read every clause and then ask whether day-to-day working practices will genuinely match it.

The core IR35-relevant contract clauses to check

When working through the document, focus on the terms that speak to the traditional status tests. These are the key clauses in an outside IR35 contract that specialists and HMRC guidance both return to again and again.

Substitution. Does the contract give your business a genuine, unfettered (or lightly fettered) right to send a substitute to do the work, rather than a theoretical right that would never be accepted by the client? Look for any requirement that the client must approve a substitute on reasonable grounds only, versus wording that lets the client refuse for any reason, which tends to look more like a requirement for personal service.

Control. Check what the contract says about who directs how, when, and where the work is done. Terms that give the client the right to direct method and hours in the way an employer would tend to point towards employment-style control. Terms that leave your business to decide how the deliverable is achieved sit more comfortably with a genuine business-to-business relationship, provided this matches reality.

Mutuality of obligation. Look at whether the contract is for a defined piece of work or deliverable, with no obligation on the client to offer further work and no obligation on you to accept it, as opposed to an open-ended arrangement that looks like ongoing employment. This is assessed together with control rather than in isolation.

Financial risk and equipment. Does your business bear any financial risk (for example, liability for correcting defective work) and provide its own equipment where relevant? These are secondary indicators but often reinforce or undermine the picture from substitution and control.

Termination and notice. Short notice periods that mirror employment terms, or provisions that look like disciplinary process rather than commercial termination for breach, can also be relevant.

Exclusivity and other client-specific terms. Clauses that prevent you from working for other clients, or that require you to attend staff events, appraisals, or reviews in the same way as employees, are worth flagging.

What the PGMOL case adds to the picture

Current guidance and commentary point to Professional Game Match Officials Ltd as the leading case on how substitution, control, and mutuality of obligation interact. Summaries of the case describe the tribunal finding no sufficient mutuality of obligation outside individual engagements, and insufficient control to make the wider arrangement one of employment. The practical lesson often drawn from this for contract review is that a realistic substitution clause and genuine limits on client control matter, but mutuality and control are assessed together with the overall reality of the working relationship rather than any one clause in isolation.

What to check before signing a contractor contract

A sensible pre-signature checklist includes:

• Reading the substitution, control, and mutuality clauses together, not in isolation
• Asking whether the day-to-day working practices you expect will actually match the wording
• Requesting the Status Determination Statement (SDS) from the end client, since only the client can make that determination
• Checking whether a CEST result has been used, bearing in mind HMRC treats CEST outputs as not determinative on their own
• Getting a qualified IR35 contract reviewer or contractor accountant to look at the full document, not just a summary

GOV.UK material aimed at contractors explains that the off-payroll rules exist to ensure individuals working like employees through a personal service company or other intermediary pay broadly the same tax and National Insurance contributions as employees (GOV.UK: Important facts for contractors - off-payroll working rules (IR35)). Whether a specific engagement falls inside or outside those rules is for the end client to determine via the SDS, informed by the real contract terms and working practices, not by how the role is advertised or labelled.

If you are currently comparing engagements, you can browse outside-IR35 contracts on the board and check day-rate benchmarks for similar roles, alongside our other guides on status reviews and working practices.

This platform does not determine, verify, or warrant IR35 status; the SDS is the client's legal responsibility. Contractors should take their own advice and consider IR35 insurance.