In the UK contracting landscape, the importance of accurately assessing IR35 status has never been greater. Since the off-payroll working rules changed in the private sector in April 2021, the responsibility for determining IR35 status shifted from contractors to medium and large businesses engaging them. This change means that businesses are now expected to carry out a thorough, fair, and accurate IR35 assessment for each contractor they work with. An incorrect determination can lead to penalties, unexpected tax liabilities, and reputational risks.

For businesses that rely heavily on temporary workers and contractor support, understanding how to check IR35 status accurately is essential. Many companies feel uncertain about what steps to take, which tools to use, or how to evaluate working practices correctly. This article explores how businesses can check IR35 status accurately, why it matters, what risks are involved, and how expert support from payroll specialists such as The Infinity Group can help ensure full compliance.

Understanding IR35 and Why Checking Status Matters

IR35, also known as the off-payroll working rules, is HMRC legislation designed to ensure that workers operating as contractors via limited companies pay the correct amount of tax. The objective is to prevent contractors who work like employees from paying less tax by using a limited company structure.

Checking IR35 status matters because
it determines whether a contractor should be taxed as an employee or as a genuine independent worker
it ensures the business remains HMRC compliant
it helps avoid financial penalties and legal disputes
it protects both the contractor and the organisation

A correct IR35 assessment benefits everyone involved. Contractors gain clarity on their tax position, and businesses protect themselves from compliance risks.

Who Is Responsible for Checking IR35 Status

Since April 2021, IR35 responsibilities in the private sector changed significantly. The responsibility now depends on the size of the organisation:

Medium and large businesses are responsible for determining IR35 status.
Small businesses can still rely on contractors to assess their own status.

Most businesses in the UK fall into the medium and large category, meaning they must
carry out the IR35 assessment
issue a Status Determination Statement (SDS)
manage any disputes
retain evidence of the decision

Failure to follow these steps could result in the business becoming liable for unpaid tax, National Insurance, and penalties.

Key Factors to Consider When Checking IR35 Status

IR35 assessments depend on the actual working practices rather than the written contract alone. HMRC looks at three core factors:

Control
Substitution
Mutuality of obligation

A business must consider these carefully when evaluating IR35 status.

Control

Control refers to how much influence the business has over the contractor’s work. Relevant questions include
Who decides how the work is done
Can the contractor choose their own working methods
Does the contractor have flexibility over working hours
Is the contractor supervised the same way as a permanent employee

A contractor who works independently, without day-to-day supervision, is more likely to fall outside IR35.

Substitution

Substitution examines whether the contractor can send someone else to complete the work.
If the contractor has the right to provide a substitute worker, even if they rarely use it, this supports an outside IR35 position.
If the business requires the contractor personally to perform the work, the engagement is more likely to be inside IR35.

Mutuality of Obligation

This refers to the expectation of ongoing work.
If the business must offer work and the contractor must accept it, this suggests an employment-type relationship.
If work is delivered on a project basis with no ongoing obligation, the contractor is more likely to fall outside IR35.

These three principles form the foundation of any accurate IR35 assessment.

Additional Considerations Businesses Must Evaluate

Beyond the core principles, several secondary factors also influence IR35 status:

Financial risk
Part and parcel of the business
Provision of equipment
Right of dismissal
Exclusive service
Payment method
Business structure and marketing
Level of integration into the team

A genuine contractor typically
takes on financial risk
has their own equipment
works for multiple clients
markets their services
is not integrated into the company workforce

By carefully reviewing these factors, businesses can achieve a clearer and more accurate assessment.

Using the CEST Tool for Checking IR35 Status

CEST (Check Employment Status for Tax) is an online tool provided by HMRC to help businesses check whether a contractor falls inside or outside IR35. It is free to use and widely recognised.

Benefits of CEST include
providing quick assessments
offering an official, HMRC-aligned framework
producing results that HMRC will respect if accurate information is entered
giving clarity to businesses with limited IR35 knowledge

However, CEST has limitations. It may struggle with complex cases or nuanced working arrangements. Some answers require interpretation, and incorrect responses can produce unreliable results. It also historically had difficulty assessing mutuality of obligation accurately.

Businesses should use CEST as part of the process but not rely on it entirely. A combination of CEST, expert review, and an in-depth analysis of working practices provides the most accurate outcome.

How to Conduct an Accurate IR35 Assessment Step by Step

To check IR35 status accurately, businesses should follow a structured process.

Step 1: Gather all relevant information

This includes
an up-to-date contract
details of working practices
project requirements
communication records
relevant HR and payroll information

The contract must reflect the actual way the contractor works.

Step 2: Evaluate control, substitution, and mutuality of obligation

Each factor needs clear answers supported by evidence.
Businesses should involve hiring managers, team leads, or project coordinators to gain real insight into the contractor’s working behaviour.

Step 3: Use an IR35 assessment tool

CEST, or other industry-recognised tools, help structure the evaluation.
Some businesses choose third-party tools offering more detailed assessments.

Step 4: Document the outcome

All businesses must produce a Status Determination Statement (SDS).
This document must
state the contractor’s IR35 position
explain the reasoning behind the decision
include supporting evidence

The SDS must be shared with both the contractor and the recruitment agency (where applicable).

Step 5: Provide the contractor with a dispute process

Contractors have the right to challenge the IR35 determination.
Businesses must
respond within 45 days
provide further clarity
reassess if necessary

This process ensures fairness and transparency.

Step 6: Record and store all IR35-related documentation

Evidence must be stored securely.
In case of an HMRC investigation, documentation is essential to support the decision.

By following these steps, businesses improve the reliability of their IR35 assessments and reduce compliance risks.

Common Mistakes Businesses Make When Checking IR35 Status

Many mistakes occur when businesses perform IR35 assessments without sufficient understanding. Common errors include
focusing solely on the contract
relying only on CEST
misinterpreting working practices
failing to consult managers actually working with the contractor
ignoring substitution rights
assuming all contractors fall inside or outside IR35
not documenting evidence thoroughly

Another frequent mistake is applying blanket IR35 determinations, where a company declares that all contractors fall either inside or outside IR35 without individual assessment. HMRC discourages this practice and views it as non-compliant.

The Impact of Incorrect IR35 Assessments

Incorrect assessments can result in significant consequences for businesses. These risks include
financial penalties
unexpected tax liabilities
HMRC investigations
damage to contractor relationships
reduced access to contractor talent
reputational harm

Contractors prefer working with businesses that understand IR35, conduct assessments properly, and provide clear communication. A poor IR35 process may discourage contractors from accepting work, especially in competitive industries like IT, engineering, and construction.

How Regular Reviews Strengthen IR35 Accuracy

IR35 assessments should not be a one-time task. Working practices often evolve during a contract.
Businesses should regularly review
the contractor’s role
any changes in control or supervision
new responsibilities
extensions or new project scope

If working practices change, IR35 status must be updated.

Why Businesses Should Consider Professional Support

Because IR35 involves a mix of legal, tax, and operational requirements, many businesses choose to seek specialist support. Payroll and compliance experts help ensure that assessments are accurate, fair, and fully documented.

A reliable provider such as The Infinity Group can support businesses in the following ways
conducting detailed IR35 checks
explaining assessment criteria clearly
producing compliant SDS documents
offering guidance on working practices
ensuring HMRC compliance
helping handle disputes professionally

By partnering with an experienced provider, businesses reduce uncertainty and benefit from ongoing compliance support.

The Role of The Infinity Group in Supporting Accurate IR35 Checks

The Infinity Group specialises in payroll compliance for contractors and businesses across the UK. Their expertise in managing CIS payroll, PAYE umbrella services, and IR35 guidance helps companies simplify the process and remain fully compliant.

Their support includes
accurate IR35 assessments
clear explanations of complex rules
transparent documentation
ongoing compliance monitoring
tailored advice for different sectors

With extensive experience in contractor payroll, The Infinity Group ensures that businesses understand their obligations and implement robust procedures that protect both the organisation and the contractor.

Conclusion

Accurately checking IR35 status is essential for UK businesses relying on contractor talent. With the responsibility now firmly placed on businesses, a structured and informed approach is crucial. By understanding the core IR35 principles, evaluating real working practices, and using the right tools, companies can ensure accurate and compliant status determinations.

Mistakes can lead to costly penalties, reduced contractor engagement, and increased compliance risks. However, with the right support and clear procedures, businesses can manage IR35 effectively and confidently.

Partnering with specialists such as The Infinity Group provides valuable reassurance that assessments are consistent, documented, and HMRC compliant. In a constantly evolving regulatory environment, professional guidance helps businesses operate confidently while protecting contractors and maintaining operational efficiency.