Delays to IR35


As of this moment the government has postponed the tax reforms to payroll working (AKA IR35). The legislation has been delayed for the private sector up until 2021, no doubt due to the complications COVID-19 has put on businesses and contractors. The decision was originally announced on the 17th March in the House of Commons.

The controversial reforms have of course created multiple detractors with valid concerns such as blanket status determinations, early termination of contracts, contractors being left as ‘zero-rights employees’ (meaning they are without the rights of employees or the tax advantages of being self-employed).

Here are some tips to understand the “IR35 holy trinity” (substitution, SDC and mutuality of obligation) which we believe will help in preparing your business for IR35.


The ability for contractors to substitute another worker in their place to carry out the work and pay them via their own limited company. If this is possible, feasible and a realistic prospect, then IR35 will not apply.

SDC, aka Supervision, Direction and Control

The level of direct management a contractor receives, how much they are supervised or how much their work is directed or controlled by a manager. If a contractor is solely responsible for managing and directing their own work, it lessens the likelihood that the role is subject to IR35.

Mutuality of Obligation

Are the contractor and business obliged to one another in any way? It is HMRC’s view that if a working contract exists, then mutuality of obligation exists. A lack of mutuality or obligation is typically only apparent in zero-hours contracts, for example, if the client is not obliged to provide the contractor with any work and the contractor is not obliged to pick up any work offered to them. There’s no obligation on either end. If there is no mutuality of obligation, then IR35 will not likely apply.

This ‘holy trinity’ are not the only factors however – also important is understanding whether a contractor is treated as ‘part and parcel’ of the organisation, for instance. Do they attend company-sponsored events, or are they expected to sit in on strategy town halls? Are they required to undergo employee training for issues such as diversity and inclusion? If so, it’s very likely that IR35 will apply.

In conclusion

The crux of the role for end hirers will be to determine the IR35 status of each of your contractors. HMRC have listed several ways to determine a status but as might be expected, arriving at a conclusion is not always as straightforward as one might hope.

To better protect yourself and your organisation, those of you who are likely to be affected by the change in legislation should seek the relevant financial help needed to ensure you remain within IR35 before the April 2021 deadline.


Find how ENGAGE can help with IR35