IT Contractors - How IR35 reform will affect you

What is IR35 and how will it affect us as IT Contractors:

The IR35 legislation provides rules around taxation for Contractors working through an intermediary, such as a limited/personal service company. It aims to ensure that Workers who would have been an employee if providing their services directly to a Client pay the same amount of tax and National Insurance contributions as employees. At present, Contractors working in the private sector are responsible for determining their own IR35 status, however this is about to change.

Following the introduction of IR35 reforms into the public sector in 2017, it has now been confirmed that the new off-payroll legislation will also be extended into the private sector from April 2021. Though there has been a further delay from the initial roll out in April 2020, it is widely expected that the reform will now go ahead as planned without any further delays.

To help end user Clients and Contractors fully prepare, Parker Shaw can aid you in understanding how Contractors will be assessed.

What this means to you as the Client hiring IT Contractors:

  • From April 2021, the end user Client will be responsible for carrying out an assessment to determine the IR35 status of limited company workers. If the Contractors are found to be inside IR35, they will be subject to PAYE and NICs deductions.
  • The Client will then have an obligation to share the IR35 status with the Worker and anyone else involved in the supply chain, such as an agency. The Client should then demonstrate they’ve taken reasonable care in carrying out the IR35 assessment in a fair and objective manner.
  • If a Worker is deemed to be outside of IR35, and the decision is later proved to be incorrect, liability for PAYE and NIC deductions could fall on you, or on the organisation that has failed to fulfil their legal obligation in the assessment (your end client, for example).

What this means to you as the IT Contractors/Worker

  • Workers who are identified as inside IR35 will be required to change their payment method to PAYE, either through their agency or via an Umbrella organisation.
  • You can still work through your Limited Company, but the tax and NICs will be taken at source.
  • Take-home pay will ultimately be reduced for all workers who must change to the above method.

How to assess whether you are inside or outside of IR35:

Being assessed as either inside or outside IR35 is based on a number of factors including the following criteria:

Supervision, Direction and Control:

To what extent can the Client control how, what, when or where the Contractor carries out the work?


Can the Contractor replace themselves at any time by asking someone else to perform the work, or is it the personal service of the named Worker that is required?

Mutuality of Obligation:

Does the Worker have to accept additional work offered, and is the Client obliged to offer them work?

What to do now:

As an IT recruitment agency, we provide both IT contractors and IT Perm staff throughout the UK.

The IR35 reform may have a substantial affect to the hiring plans of the end user who has relied upon IT contractors for many years, these clients may now look to move from hiring IT contractors to employing permanent IT staff.

From the contractor’s perspective, the knock-on effect to losing the benefits of working for a personal services company may make the previous work untenable, this may reduce the availability of IT contractors for many positions, as they look to work for small businesses unaffected by the reform, by working on roles deemed as outside of IR35 or to come away from contracting all together.

If you believe you will be affected by the IR35 reform and still have more questions on how to prepare for the assessment, please contact Paul Booth at Parker Shaw for a no-obligation discussion on 02380 606100, or by email to

The government has also provided information and support for anyone that this may affect which can be found by following this link

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