"ir35" receives over 5,000 monthly UK searches. ZERO software agency addresses IR35 on their website. This guide is unique in the UK market.
The April 2021 Reform — What Changed and Who It Affects
| Period | Who Was Responsible for IR35 Assessment | Still Applies? |
|---|---|---|
| Pre-April 2017 | Contractor — assessed their own status | No (public sector changed) |
| April 2017–March 2021 | Public sector: engaging organisation. Private sector: contractor | No (private sector changed April 2021) |
| April 2021 onwards (current) | Medium/large businesses: engaging organisation. Small businesses: contractor still responsible | Yes — CURRENT RULES |
Annual turnover: £10.2 million or less
Balance sheet total: £5.1 million or less
Number of employees: 50 or fewer
Size definitions under Companies Act 2006 — a business is "small" if it meets TWO of these three criteria:
If your business exceeds two of these thresholds, you are medium or large — and you bear the IR35 determination liability for every contractor engagement.
The Status Determination Statement (SDS) — Your Legal Obligation
As a medium or large business engaging contractors, you must issue a Status Determination Statement (SDS) for each engagement. Legal requirements:
What must an SDS include: (1) Whether the engagement is inside or outside IR35. (2) The reasons for that determination — this must be substantive, not just a conclusion. (3) The date of the determination. The SDS must be given to the contractor and any agency in the supply chain before or at the start of the engagement.
Reasonable care obligation: You must apply "reasonable care" to every IR35 determination. HMRC guidance states this means: a genuine, considered assessment of the facts — not a rubber stamp. You should document the assessment process, the factors considered, and how they influenced the conclusion.
Failure to issue an SDS: If you fail to issue an SDS, the liability for unpaid tax and NI automatically falls on you — even if the engagement would otherwise have been outside IR35.
Contractor challenge rights: A contractor can challenge an SDS determination through a formal client-led status disagreement process. You must respond within 45 days with either a revised determination (with reasons) or a confirmation of the original (with reasons). If you ignore the challenge, you bear the tax liability.
The Financial Cost of Getting IR35 Wrong
Example: A senior developer engaged at £500/day, 220 days/year = £110,000 annual contract. If inside IR35 and miscategorised: Income tax on £110,000 at 40% rate: ~£28,000. Employee NI: ~£7,000. Employer NI: ~£15,180. Interest and potential penalties. Total potential HMRC claim: £50,000–£80,000+ per contractor per year — retrospectively for up to 6 years.
The ClickMasters Model — Zero IR35 Risk for Clients
| Factor | Typical Contractor Agency | ClickMasters Staff Augmentation |
|---|---|---|
| Who is the employer? | The contractor's PSC — the contractor employs themselves | ClickMasters Ltd — the developer is our employee |
| IR35 assessment required? | Yes — you must issue an SDS per engagement | No — you engage ClickMasters as a company |
| IR35 liability if incorrect? | Falls on you (the fee payer) | N/A — no IR35 exposure for your business |
| PAYE and NI handled by? | You (inside IR35) or contractor (outside IR35) | ClickMasters — always, regardless of engagement type |
| Number of invoices? | One PSC invoice per contractor | One monthly invoice from ClickMasters |
| Right to work check? | You must verify each contractor | ClickMasters pre-verifies all engineers; certificate provided |
| Blanket determination risk? | Yes — HMRC prohibits blanket "outside IR35" determinations | N/A |
| IR35 dispute risk? | Yes — contractor can challenge your SDS | N/A — no individual contractor relationship |