A well-drafted contract is essential for an outside IR35 position, but it is not sufficient on its own. HMRC will look at the actual working practices, not just the paper contract. That said, a contract containing the right language gives you a strong foundation and demonstrates that both parties understood the engagement to be outside IR35 from the outset.
A contract claiming substitution rights that have never been used, or claiming no control when the client dictates your working hours, will not protect you. The contract must accurately reflect how the engagement actually works.
Essential clauses for an outside IR35 contract
Substitution clause
The contract should include a clear, unfettered right of substitution. Key elements:
- You (the contractor or your PSC) can provide a suitably qualified substitute
- The client cannot unreasonably refuse a substitute
- The cost of the substitute is borne by you, not the client
- Ideally, the contract specifies that substitution has occurred or is genuinely available
Mutuality of obligation
The contract should explicitly state that the client is under no obligation to offer further work beyond the current assignment, and that the contractor is under no obligation to accept it. A clause stating the relationship is project-based and ends on completion of the defined scope is helpful.
Control
Language should reflect that you determine how the work is carried out. Avoid language such as "working under the direction of" or "reporting to [named manager]" which implies supervision. Instead use "delivering the agreed outcome" or "providing services in accordance with your professional judgement".
Equipment and location
Where possible, include that you will use your own equipment and work from your own premises. This is not always practical, but where it is accurate, it should be reflected.
Red flags in a contract
- "You must attend the office between [hours]" (indicates control over hours and location)
- "You must obtain prior approval before working for other clients" (indicates exclusivity)
- "You are required to follow the client's policies and procedures" (indicates integration)
- "You may not provide a substitute without prior written consent from the client" (restricts substitution)
- A notice period for termination on both sides without specific cause (indicates mutual obligation)
Getting a professional contract review
Many IR35 specialists offer contract review services for a fixed fee (typically £100 to £300). They will identify risky clauses, suggest amendments, and give an opinion on the likely IR35 status based on the contract. This is money well spent before starting a significant engagement. Find an IR35 specialist through our directory.
Contract review vs working practices review
A contract review alone is insufficient. Ask your adviser to also review your working practices, ideally through a questionnaire covering how you actually operate day to day. The combination of a well-drafted contract and consistent working practices gives the strongest outside IR35 position.
This guide provides general information only. IR35 is complex and the consequences of getting it wrong are significant. Always seek specialist advice from a qualified tax adviser. Find one via our accountant directory.