However, since the introduction of the IR35 legislation—also known as the off-payroll working rules—consultants must carefully consider whether their contracts place them inside or outside IR35. Misclassification can result in significant tax liabilities, penalties, and reputational risks.
So, the question arises: dose IR35 apply consultants in the UK? The short answer is yes—but the extent to which it applies depends on the nature of the consultant’s engagement, the working relationship with the client, and how HMRC views their employment status.
This article will explain IR35 in detail, explore how it applies to independent business consultants, highlight the risks and responsibilities, and outline how to remain compliant in 2025 and beyond.
What Is IR35?
IR35 was introduced by HMRC in 2000 to prevent tax avoidance by individuals who work like employees but operate through limited companies to pay less tax.
The rules distinguish between two categories of workers:
- Inside IR35 – The contractor is effectively considered an employee for tax purposes. They must pay Income Tax and National Insurance Contributions (NICs) similar to an employee.
- Outside IR35 – The contractor is genuinely self-employed, with the freedom to manage their business, choose how they work, and take on multiple clients.
Since April 2021, in the private sector, responsibility for determining IR35 status shifted to the end client (if the client is medium or large). For small clients, the responsibility remains with the contractor.
For business consultants, this means IR35 can absolutely apply—depending on how they deliver their services.
Does IR35 Apply to Independent Business Consultants?
Yes, IR35 applies to independent business consultants if the nature of their work makes them look like an employee rather than a self-employed professional. HMRC does not judge based solely on job titles—it looks at the actual working practices.
Examples of IR35 in Action for Business Consultants
Example 1 – Inside IR35
A management consultant is contracted for 12 months to oversee a company’s restructuring project. They work at the client’s office full-time, attend staff meetings, and take instructions from a senior manager. They have no right of substitution and rely on the client’s resources.
HMRC view: This looks like employment. The contract would likely fall inside IR35.
Example 2 – Outside IR35
A strategy consultant is hired to provide independent advice on expanding into a new market. The consultant delivers recommendations, controls their working hours, uses their own systems, and is paid per project milestone. They are free to substitute another consultant from their firm if needed.
HMRC view: This looks like genuine self-employment. The contract would likely fall outside IR35.
Risks of Non-Compliance for Consultants
If a consultant is incorrectly classified as outside IR35 when they should be inside, the consequences can be severe:
- Backdated tax bills – HMRC can demand unpaid Income Tax and NICs.
- Penalties and interest – In addition to the tax owed, penalties and late payment interest may apply.
- Loss of reputation – Being investigated for IR35 non-compliance can damage credibility with clients.
- Reduced earnings – Being found inside IR35 reduces take-home pay, as PAYE and NICs apply.
How Independent Consultants Can Protect Themselves
1. Review Contracts Carefully
The wording of your contract must reflect genuine consultancy services. Avoid clauses that suggest employee-like control, such as fixed working hours or integration into staff teams.
2. Ensure Working Practices Match the Contract
Even if a contract states substitution is allowed, if in practice the client would not accept it, HMRC will consider reality over paperwork.
3. Use HMRC’s CEST Tool with Caution
HMRC provides a Check Employment Status for Tax (CEST) tool. While it can give an indication, it has limitations and may not cover all scenarios.
4. Maintain Evidence of Independence
Keep records that show you operate as a business: multiple clients, professional insurance, business website, and your own equipment.
5. Seek Professional Payroll Support
Many consultants work with specialist payroll providers to ensure compliance and reduce risks. This allows them to focus on delivering value to clients while experts handle IR35 complexities.
The Infinity Group: Helping Consultants Navigate IR35
For independent business consultants, navigating IR35 rules can be daunting. Understanding whether you fall inside or outside requires careful analysis of contracts and working practices.
This is where can help. As a trusted UK payroll specialist, The Infinity Group provides:
- IR35 compliance support – Helping consultants and their clients assess contracts correctly.
- Umbrella payroll solutions – A compliant option for those working inside IR35.
- CIS payroll services – For consultants and contractors in the construction sector.
- Managed payroll services – To simplify administration, reduce errors, and stay HMRC-compliant.
By working with a provider like The Infinity Group, independent business consultants can reduce the risks of non-compliance while ensuring they receive accurate, timely payments. This not only saves time but also provides peace of mind in an increasingly complex regulatory environment.
Does IR35 Apply to All Consultants?
Not every consultant will fall inside IR35, but every consultant must consider it. The key is understanding the nature of each engagement. Short-term projects with clearly defined deliverables, autonomy, and genuine business risk are usually outside IR35. Long-term contracts with employee-like conditions are more likely inside IR35.
With HMRC paying close attention to off-payroll arrangements, no consultant can afford to ignore IR35.
Final Thoughts
For those seeking a straightforward way to manage IR35 risks, professional support is invaluable. The Infinity Group offers tailored payroll and compliance solutions, helping consultants focus on their work while remaining fully compliant with HMRC rules. In today’s complex regulatory environment, the safest route for consultants is to stay informed, proactive, and supported by payroll experts who understand the challenges of modern contracting.
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