IR35 is surrounded by misconceptions that can lead contractors to make poor decisions about their working arrangements and tax planning. Here are ten of the most common myths, and the reality behind each one.
Myth 1: Working from home means you are outside IR35
Remote working is a positive indicator of self-employment, but it does not guarantee an outside IR35 determination on its own. HMRC considers the entire working relationship, including control, substitution rights, and mutuality of obligation. A remote worker who is managed daily, cannot send a substitute, and has rolling contracts looks much like a remote employee.
Myth 2: If your contract says outside IR35, you are safe
Contractual terms are only one part of the picture. Tribunals consistently look at the reality of the working arrangement. If your contract says you have a right of substitution but you have never exercised it and the client would not accept one, the clause carries little weight. Your actual working practices must align with the contract.
Myth 3: Small companies do not need to worry about IR35
Small companies in the private sector are exempt from making IR35 determinations under the off-payroll rules. This means the contractor retains responsibility for their own status assessment. However, IR35 itself still applies. If HMRC investigates and finds your engagement is effectively employment, you remain liable for the additional tax and NICs regardless of the client's size.
Myth 4: IR35 only affects IT contractors
While IT contracting is the most commonly discussed sector, IR35 applies to all industries. Locum doctors, interim managers, engineering consultants, media professionals, and financial services contractors are all potentially affected. Any individual providing services through an intermediary could fall within scope.
Myth 5: You cannot be outside IR35 if you only have one client
Having a single client is not automatically fatal to an outside IR35 determination, though it is a relevant factor. Many genuinely self-employed businesses have a single major client at any given time. What matters is whether you have the freedom to work for others, whether you market your services, and whether the overall working arrangement is one of genuine self-employment.