What is IR35?

A Plain-English IR35 Guide for Contractors

IR35 is one of those terms every UK contractor has heard, often with a sigh, but not everyone feels confident explaining it. Is it tax law? Employment law? Something else entirely? The short answer: it’s a tax rule designed to identify whether a contractor is genuinely self-employed or, in HMRC’s eyes, working like an employee.

Here’s the thing. IR35 isn’t about stopping contracting. It’s about stopping what HMRC calls “disguised employment”. And whether you agree with that framing or not, understanding IR35 properly can save you a lot of stress and potentially a lot of money.

This guide sits at the centre of our IR35 knowledge hub. From here, we’ll branch into detailed articles on status tests, determinations, insurance, umbrella companies, and more.

Why was IR35 introduced?

IR35 came into force in 2000, long before remote work became normal. HMRC was concerned that some individuals were leaving permanent roles, setting up limited companies, and returning to do the same job, but paying less tax.

So IR35 was created to answer a single question:

If you removed the limited company from the arrangement, would this look like employment?

If the answer is yes, the engagement may fall “inside IR35”.

Inside vs Outside IR35 (The Big Divide)

This distinction underpins everything:

Outside IR35: You’re operating as a genuine business. You take financial risk, control how you work, and can provide a substitute.
Inside IR35: You’re treated as an employee for tax purposes without employee rights.

The practical differences are explored in depth in our cluster article: Inside vs Outside IR35 Explained.