Employment Status & IR35 Advice for Employers and Businesses

Getting worker classification wrong is one of the most expensive mistakes a business can make. Whether you engage freelancers, consultants, or contractors, our solicitors advise employers across Manchester and the UK on employment status, IR35 compliance, and how to structure contractor arrangements that are legally sound from the outset.

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HMRC can investigate employment status going back six years. Where a contractor is found to have been a disguised employee, the business faces backdated tax, National Insurance contributions, penalties, and interest. All of which can far exceed what was saved through flexible engagement. The risks are not theoretical. Since April 2021, medium and large businesses in the private sector have been responsible for determining IR35 status, and the consequences of getting it wrong sit with the business, not the contractor. Our solicitors advise on employment status determinations, IR35 contract reviews, and how to structure engagements that withstand HMRC scrutiny.

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What This Means for You

  • Clear advice on whether your contractor arrangements are legally sound
  • IR35 status determinations before HMRC raises the question
  • Contracts that reflect the real working relationship accurately
  • Reduced risk of backdated tax liability and HMRC investigation
  • Confidence to engage contractors without legal or tax exposure


How Our Employment Status Solicitors Help Employers and Businesses

From IR35 contract reviews to full employment status audits, our solicitors advise on every aspect of contractor engagement and worker classification.

IR35 Contract Review

We review contractor agreements against the three IR35 tests: control, substitution, and mutuality of obligation. We advise on whether the arrangement is inside or outside IR35 and what changes are needed.

Employment Status Determination

We advise employers on determining whether individuals engaged through their business are employees, workers, or genuinely self-employed, including where the working relationship has evolved over time.

Contractor Agreement Drafting

We draft consultancy agreements and independent contractor agreements that accurately reflect the working relationship and reduce the risk of a successful employment status challenge by the individual or HMRC.

Status Determination Statements

We advise on producing accurate and defensible Status Determination Statements for contractors engaged under the off payroll working rules, and on the process for handling contractor disagreements.

Employment Status Audit

Where businesses engage multiple contractors or have longstanding freelance relationships, we carry out structured employment status audits to identify risk across the workforce and prioritise action.

Engagement Structure Advisory

We advise on how to structure contractor and freelancer engagements from the outset, covering contract terms, working practices, and governance to build arrangements that are legally and commercially sound.

When To Seek Advice

  • You engage contractors or freelancers and have not reviewed their IR35 status
  • Your business has grown to medium or large size and off-payroll rules now apply
  • A contractor has challenged their employment status or raised a tribunal claim
  • HMRC has contacted you about your contractor arrangements or off-payroll obligations
  • You want to bring in a new contractor and need the agreement structured correctly from the start
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Why Businesses Choose MAR Legal for Employment Status & IR35 Advice

Solicitor-Led Advice

Every status determination and contract review are handled by qualified solicitors with direct employment law experience.

Commercial Approach

Advice that reflects how businesses actually engage contractors, not just what the legislation says.

Fixed-Fee Options

Transparent pricing on IR35 reviews and employment status advice before work begins.

End-to-End Support

We advise from initial engagement structuring through to status determination statements and contract drafting.

Trusted by businesses across the UK for clear, accessible legal advice.

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How Our Employment Status Process Works

01

Initial Brief

We take a brief on the contractor arrangement, the working relationship in practice, and the specific concern or objective

02

Review & Assessment

Advice that reflects how businesses actually engage contractors, not just what the legislation says.

03

Advice & Recommendations

We set out our assessment, identify the risk level, and recommend the changes needed to the contract or working arrangements.

04

Documentation

We produce or update the contractor agreement, status determination statement, or other documentation required to put the position on a sound footing.

Employment Status & IR35 for Employers FAQs

Employment status in UK law sits on a spectrum. Employees have the fullest range of rights including unfair dismissal protection, statutory sick pay, and holiday pay. Workers have fewer rights but are entitled to the national minimum wage, holiday pay, and protection from discrimination. Self-employed contractors operate outside the employment relationship and have no statutory employment rights from the engaging business. The label used in a contract does not determine status. Tribunals look at the reality of the working relationship, including control, substitution, and mutuality of obligation.

IR35 is anti-avoidance tax legislation designed to prevent disguised employment, where a contractor works through a limited company, but the reality of the arrangement resembles employment. Since April 2021, medium and large private sector businesses have been responsible for determining a contractor's IR35 status and applying PAYE if the arrangement is inside IR35. Getting this wrong creates backdated tax and National Insurance liability for the business, not the contractor. Small businesses are currently exempt from this responsibility but should still ensure their contractor arrangements are correctly structured.

The IR35 assessment looks at three primary factors. Control: does the business control how, when, and where the contractor works? Substitution: can the contractor send someone else to do the work? Mutuality of obligation: is there an ongoing expectation of work and payment beyond the specific engagement? No single factor is determinative. HMRC's CEST tool provides an indication but is not binding and has been criticised for its accuracy. A contract review against the actual working relationship is the most reliable way to assess the position.

A Status Determination Statement is a written document that sets out an employer's conclusion on a contractor's IR35 status and the reasons behind it. Medium and large businesses operating under the off-payroll working rules are required to produce one for each contractor engagement and provide it to both the contractor and the fee-payer. The statement must give reasons, not just a conclusion. Contractors have the right to dispute the determination, and the business must respond to any dispute within 45 days. Failure to produce a valid SDS means the business retains the IR35 liability regardless of the outcome.

Yes. The label in a contract does not determine employment status for legal purposes. Tribunals look at the reality of the working relationship, how the engagement operates in practice rather than how it is described on paper. Cases like Uber v Aslam and Pimlico Plumbers established clearly that individuals can be classified as workers or employees regardless of what their contracts say. If the reality of the arrangement involves significant control, personal service, and an expectation of ongoing work, a claim for worker or employee status is possible even where the contract says otherwise.

Where HMRC determines that a contractor should have been treated as inside IR35, the business faces backdated PAYE income tax and National Insurance contributions going back up to six years, plus interest and penalties. Since April 2024, a statutory set-off mechanism allows businesses to offset tax already paid by the contractor's company against the liability, which reduces the exposure in some cases. The financial risk can be substantial, particularly for businesses that have engaged multiple contractors over a long period without carrying out proper status assessments.

The contract should accurately reflect the real working relationship, including a genuine right of substitution, limited control over how the work is done, and no expectation of ongoing work beyond the specific project. Working practices need to match the contract, because HMRC looks at substance not just documentation. The contractor should ideally work for multiple clients, use their own equipment, and operate genuinely independently. Governance arrangements, including how instructions are given, how performance is managed, and how the engagement is terminated, all contribute to the overall employment status picture.

MAR Legal provides advisory and documentation support in relation to employment status and contractor engagement. This service covers legal advice on status determination, contract review, and engagement structuring only. IR35 involves both legal and tax considerations. Where tax advice is required, we work alongside appropriately qualified tax professionals. Where a matter involves reserved legal activities, we work alongside appropriately regulated professionals.