UK IR35 Off-Payroll Working & Status Guide 2026

Authoritative tax guide to IR35 off-payroll working legislation (Chapter 8 & Chapter 10 ITEPA): Inside IR35 vs Outside IR35 status determinations, Status Determination Statements (SDS), HMRC CEST tool criteria, and fee-payer tax liabilities.

1. Inside IR35 vs Outside IR35 Status Comparison

The **IR35 off-payroll working rules** are designed to determine whether a worker providing services through an intermediary, such as their own Personal Service Company (PSC), would have been an employee or office holder if engaged directly by the client. The rules can require PAYE Income Tax and National Insurance to be accounted for as if the worker were directly employed. Status is determined from the actual terms and circumstances of the engagement. Relevant factors can include personal service and substitution, control, financial risk, provision of equipment, integration and other features of the working relationship. No single factor automatically determines the result.

IR35 Status Classification	Tax & Payroll Treatment	Key Working Indicators
Outside IR35	Off-payroll rules do not require PAYE treatment by the fee-payer under Chapter 10; the intermediary remains responsible for its own tax obligations	Status depends on the overall factual relationship, including substitution, control, financial risk and other employment-status factors
Inside IR35	The deemed employer/fee-payer generally deducts PAYE Income Tax and employee National Insurance from the relevant payment and pays employer National Insurance separately	The overall relationship indicates employment or office-holder status if the worker were engaged directly

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Key Takeaways

Outside IR35 means the Chapter 10 off-payroll rules do not require the deemed-employment PAYE treatment, although the intermediary still has its normal tax obligations.
Inside IR35 generally results in PAYE Income Tax and relevant National Insurance being accounted for by the fee-payer under the off-payroll rules.
IR35 status is a holistic employment-status assessment; substitution, control, financial risk and other factors can all matter.
HMRC's CEST tool can help assess employment status, but it does not replace a careful review of the actual contractual and working arrangements.

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Frequently Asked Questions (6 Interlinked FAQs)

Inside IR35 means the off-payroll rules generally require PAYE treatment when the worker would have been an employee or office holder if engaged directly. Outside IR35 means those Chapter 10 rules do not require that deemed-employment PAYE treatment.

For public-sector clients and medium or large private-sector clients, the client generally determines the worker's status and must issue a Status Determination Statement (SDS) with reasons. For a small private-sector client, responsibility generally remains with the worker's intermediary.

The assessment looks at the actual contractual and working relationship. Important factors can include personal service and substitution, control, financial risk, provision of equipment, integration and other employment-status indicators. There is no fixed three-factor test that automatically determines the result.

Yes. A worker or deemed employer can use the statutory disagreement process. The client must consider the disagreement and normally respond within 45 days, explaining whether the determination has changed and why.

No. IR35 itself does not universally require an umbrella company. However, a recruitment agency or end-client may require a particular payroll or supply-chain arrangement, so the contractual setup should be checked separately.

If a medium or large client is wholly overseas with no UK residence or UK permanent establishment, Chapter 10 off-payroll rules do not apply to that client. The worker's intermediary may still need to consider the separate intermediary rules under Chapter 8, and UK tax or National Insurance can depend on the worker's circumstances.