IR35 Contract Review: What to Check Before You Sign

Why the contract is the starting point, not the finish line

An IR35 contract review is one of the most useful things a contractor can do before accepting a new engagement, but it is also one of the most misunderstood. The review tells you whether the written terms are consistent with an outside-IR35 position. It does not, by itself, make you outside IR35.

HMRC and tribunals apply the IR35 status tests to the actual working relationship, not to the document. The Supreme Court confirmed in Professional Game Match Officials Ltd v HMRC [2024] UKSC 29 that even where mutuality of obligation and sufficient control are present, the tribunal must still stand back and assess the whole picture. Working practices over contract wording is not a caveat to the review process; it is its governing principle, and it is the position we take with every client at Contractor Tax Accountants.

That said, a clean, well-drafted contract matters. It removes one avenue of attack, it supports a favourable CEST run, and it demonstrates that you understood the terms of your engagement. This guide covers every clause that carries real weight, in the order a specialist reviewer typically works through them.

Chapter 8 or Chapter 10: which regime governs this engagement?

Before reaching the contract itself, the first question is which set of rules applies, because this determines who makes the status decision.

Under Chapter 10 of Part 2 ITEPA 2003 (the off-payroll working rules), where the end client is a medium or large company, the client determines status and issues a Status Determination Statement (SDS) naming its conclusion and reasons. The fee-payer in the chain then operates PAYE and National Insurance on the payments to your PSC. You cannot self-determine when Chapter 10 applies.

Under Chapter 8, where the client is small (or wholly overseas), your PSC stays responsible and self-assesses. The contract review directly informs that self-assessment.

A client is small if it meets two or more of three conditions: turnover not more than £15 million, balance sheet total not more than £7.5 million, and not more than 50 employees (thresholds that apply to financial years beginning on or after 6 April 2025, imported via Companies Act 2006 s.382 and ITEPA 2003 s.60A). Because of the two-consecutive-years rule and the relevant-financial-year lag, most contractors should assume their medium and large clients remain in Chapter 10 scope for 2026/27 unless the client has confirmed otherwise in writing; the earliest exit is 6 April 2027. For the full mechanics, see our guide to the IR35 small-company exemption.

If Chapter 10 applies and you receive a Status Determination Statement before or after signing, our guide on how the SDS process works covers your rights, including the 45-day client-led disagreement route.

The three status tests: what to look for in each clause

The IR35 status test derives from Ready Mixed Concrete (South East) Ltd v Minister of Pensions [1968] 2 QB 497: an irreducible minimum of personal service, sufficient control and mutuality of obligation, with all remaining terms weighed in the round. The appellate authorities in Atholl House [2022] EWCA Civ 501, Kickabout [2022] EWCA Civ 502 and PGMOL [2024] UKSC 29 confirm that MOO and control are necessary preconditions but not decisive; the whole picture governs, including whether the worker is in business on their own account. Each contract clause relates to one or more of these tests. Here is what to check.

Substitution

Substitution is the single most powerful outside-IR35 pointer available in a contract, so the wording repays close attention. At review level, check that the clause lets the PSC supply a suitably skilled individual other than the named contractor, that the PSC alone selects and pays the substitute, and that the client may object only where the substitute demonstrably lacks the required skills. Phrases such as "client approval required" or "client may refuse in its absolute discretion" effectively destroy the right: if the client can veto a substitute for any reason or no reason, the clause is not a genuine substitution right. Before signing, ask the agency or client to amend any approval wording that goes beyond a skills check, and note carefully if they refuse, because a fettered clause is a material fact for your status assessment.

What the contract review cannot settle is whether the right is real. A nominal clause that has never been used, where you are the only person who could realistically provide the services, or where the client has informally made clear it expects you personally, will be tested against those facts rather than the drafting. The doctrine of when a substitution right is genuine, what makes a clause a sham, and how much weight it carries in the whole-picture assessment is covered in full in our guide on the substitution clause and IR35. For the contract review itself, the rule is narrow: get the wording right, then make sure it reflects reality.

Control

The control test asks how much the client directs what you do, how you do it, when you work and where. High levels of client direction look like employment. Genuine professional autonomy over method, timing and location points away from it.

What to look for in the drafting. Check for any obligation to work set hours at a fixed location under the direct supervision of a named client manager. These are the hallmarks of a contract of service. A well-drafted outside-IR35 contract states that the PSC will provide the services using reasonable skill and in a professional manner, without specifying method, and that the client will define the outcomes rather than direct the day-to-day approach. It should avoid language like "under the direction of" or "reporting to" in a supervisory sense.

What to check against the working practices. Even if the contract describes outcome-based work, look at what will actually happen. Will you sit in the client's open-plan office every day? Will you attend their daily standup as a member of their team? Will a line manager review your output and direct changes? If so, the contractual language will not hold up. The goal is for the written terms to accurately describe the real arrangement, not to paper over a genuinely supervised relationship.

Supervision, direction and control (SDC). For inside-IR35 engagements specifically, the SDC test (ITEPA 2003 ss.338A / 339A) is also relevant to travel and subsistence relief; if you are under SDC through an intermediary, home-to-client travel is not deductible. Clean control drafting that reflects real autonomy has implications beyond the IR35 determination itself.

Mutuality of obligation

At review level, check that the contract states clearly that neither party has any obligation to offer or accept further work beyond the specific assignment, and that each statement of work is treated as a fresh engagement with no expectation of renewal. This wording addresses the question of whether there is an ongoing obligation between engagements, and it is most useful where a contractor works on a series of short, discrete assignments with clear breaks. Make sure the clause is present and that it accurately matches how the engagements actually run.

What the drafting cannot do is settle status on its own. A "no MOO" clause is no longer a clean signal: in PGMOL [2024] UKSC 29 the Supreme Court confirmed that mutuality of obligation can exist within a single accepted assignment, so the clause must be paired with strong substitution and control evidence to carry weight in a determination or challenge. The doctrine, including why MOO is necessary but not decisive and how the post-PGMOL whole-picture question works, is covered in full in our guide on mutuality of obligation and IR35.

Financial risk and business-on-own-account indicators

Beyond the three-limb irreducible minimum, the third stage of the Ready Mixed Concrete test asks whether the remaining contractual terms are consistent with employment. Clauses that indicate financial risk, multiple clients, professional indemnity insurance, and the absence of any employment benefits all contribute to an outside-IR35 position.

Check the contract for:

• No entitlement to holiday, sick pay or pension from the client. These are employment benefits. A contract that grants them undermines the self-employment claim.
• Liability for defective work. If the contract requires the PSC to correct defective services at its own cost, that is a business-risk indicator. An employee is generally not financially liable for mistakes in the same way.
• Professional indemnity insurance. A clause requiring the PSC to hold its own PI insurance is consistent with a business-to-business relationship.
• Provision of equipment. Providing your own equipment points away from employment. Exclusive use of client-supplied equipment points toward it, though this is weaker than the substitution and control factors.
• Right to work for other clients. A clause explicitly permitting the PSC to provide services to other clients during the engagement (subject to no direct competition) is useful evidence. Actual use of the right is stronger still.
• Payment per deliverable or milestone rather than time. A contract that pays for outputs rather than time on site is more consistent with self-employment, though it is not determinative.

Clause-by-clause checklist before signing

The following is a practical checklist to work through on any draft contract. It is designed to be used alongside professional advice, not as a substitute for it.

Section 1: Parties and engagement structure

• Is the contract between your PSC and the agency or client (a business-to-business agreement), or between you personally and the client?
• Is there a clear statement that the relationship is one of independent contractor, not employer and employee?
• Is the contract for a specific project, deliverable or outcome rather than an open-ended commitment to work?

Section 2: Substitution clause

• Does the PSC have the right to send a suitably qualified substitute?
• Is that right genuine and unfettered (not subject to client approval on any or no grounds)?
• Is it clear that the PSC selects and pays the substitute?
• Is the only permitted client objection a demonstrable skills deficit?
• Have you considered whether, in practice, substitution could actually happen?

Section 3: Control and direction

• Does the contract define the services by outcomes and deliverables rather than by method and process?
• Are there no fixed hours specified (or, if shift patterns are required, is there a clear business reason)?
• Is location flexible, or does the contract require attendance at a named client site?
• Is there no language placing you under the supervision or direction of a named client manager?
• Does the contract avoid phrases like "as directed by" or "under the supervision of" in the services description?

Section 4: Mutuality of obligation

• Does the contract include a clause confirming that neither party is obliged to offer or accept further work beyond this engagement?
• Is each assignment or statement of work treated as a discrete arrangement?
• Is there no guarantee of a minimum number of hours, days or income?

Section 5: Financial risk and business indicators

• Does the contract exclude holiday pay, sick pay and pension contributions from the client?
• Is there a defective-services remedy requiring the PSC to correct or re-perform at its own cost?
• Is the PSC required to hold its own professional indemnity insurance?
• Is there an explicit right to provide services to other clients?
• Is payment framed per day, milestone or deliverable (rather than as a salary equivalent)?

Section 6: Termination and notice

• Does the contract provide for termination by either party on reasonable notice without the trappings of unfair dismissal rights?
• Is there no minimum-term guarantee that runs to a specific end date regardless of performance?
• Are there no restrictive covenants that go beyond legitimate confidentiality into restraints of trade that you would not see in a B2B services agreement?

When the contract is clean but the working practices are not

The most important part of this checklist happens after it: comparing each clause against how the engagement will actually operate. A professional contract review is worthwhile but not sufficient on its own. It fixes the paperwork, but HMRC and tribunals look at the actual working practices, so a clean contract sitting on top of employee-like working practices will not hold. Working practices govern over contract wording, and a substitution clause, control language or MOO drafting only helps where it reflects reality.

Ask yourself these questions honestly before signing:

• Will you be at the client's premises most or all of the time?
• Will you attend their internal meetings, use their email system and appear in their staff directory?
• Do you have a named manager at the client who reviews your work and directs your priorities?
• Has the client ever informally indicated they expect you to be personally available (not send a substitute)?
• Do you have any other clients, or does this engagement effectively occupy your full professional attention?

Where the honest answers contradict a clean-looking contract, the risk does not go away because the document is well-drafted. The appropriate response is either to negotiate genuinely different working arrangements, to go via an umbrella for an inside-IR35 engagement, or to take specialist advice on the specific facts. For the consequences of an inside determination, including take-home impact and the umbrella alternative, see our guide on what being inside IR35 actually means. For the protections available to a contractor who genuinely qualifies as outside, see our guide on protecting and evidencing outside-IR35 status.

Chapter 10: handling the SDS before and after you sign

Where the client is medium or large and Chapter 10 applies, the dynamics of a contract review change in one important respect: you are not the decision-maker. The client issues the SDS with its conclusion and reasons, and the fee-payer (usually the agency) operates PAYE accordingly. A contract review in this context serves three purposes.

Before the SDS is issued. If you review the contract terms and can demonstrate that the engagement is structured consistently with outside IR35, you are in a stronger position to present that analysis to the client before it reaches its conclusion. Many clients rely on CEST or a standard template review; a well-evidenced contractor presentation can influence the outcome.

After an inside determination. If the client issues an inside SDS and you believe it is wrong, you can make representations through the client-led disagreement process under ITEPA 2003 s.61T. There is no fixed statutory window for the contractor to submit those representations, though doing so before the engagement starts, or at least promptly, is good practice. What the 45-day deadline actually governs is the client's response: once you raise a disagreement, the client must consider your representations and respond within 45 days, either confirming the SDS with reasons or issuing a revised one. A professional contract review and working-practices assessment provides the evidential basis for that challenge.

Blanket determinations. A client that issues a blanket "inside IR35" determination across an entire contractor population, without assessing each engagement on its individual facts, is very likely failing the reasonable-care requirement under ITEPA 2003 s.61NA. An invalid SDS moves the liability back to the client. If you receive a blanket determination, seek advice on whether an individual assessment can be requested through the disagreement process.

After the review: evidence and record-keeping

A professional contract review is only part of the evidential picture. The steps you take during the engagement matter equally.

Keep a contemporaneous record of how the engagement actually runs. This means saving emails and messages that show you making autonomous professional decisions, documenting any instances where you declined to attend client premises on a given day, keeping records of any substitute arrangement (even informal discussions about the possibility), and noting other clients you have worked with during the same period. If HMRC opens an enquiry, the investigation will look at correspondence, timesheets, payment records and witness evidence from the client, not just the signed contract.

If the engagement is extended, treat the renewal as a fresh review. Extension terms frequently drift from the original contract, and the working practices may have changed in ways that affect the status analysis. An extension is also the moment to document current practices formally, before the engagement runs for so long that the 24-month temporary-workplace clock becomes relevant for travel-expense purposes.

CEST as part of the process

HMRC's Check Employment Status for Tax tool, updated on 30 April 2025, now includes a dedicated mutuality of obligation question and an upfront "is there a contract" gate. For an engagement where the written contract and working practices are clearly aligned with outside IR35, running CEST and saving the result provides a useful audit-trail document. HMRC says it will stand behind a CEST result given accurate, working-practices-consistent inputs in line with its guidance and absent avoidance.

The limits remain real. CEST does not bind a tribunal. Its MOO treatment is narrower than the position confirmed in PGMOL [2024] UKSC 29. It can return "outside IR35" on facts a tribunal would analyse differently. Use it as one piece of evidence alongside the contract review and your working-practices record, never as the primary defence.

When to instruct a specialist reviewer

A specialist IR35 contract review is most valuable at three points: before signing a new contract; before extending an existing one (especially where the engagement is approaching 12 months and the working practices may have evolved); and when you receive an SDS that you believe does not reflect the actual engagement. Reviewers check drafting, flag risk clauses, propose amendments and give a written opinion that you can retain as evidence.

The review is a starting point for a defensible outside-IR35 position, not the end of the process. The quality of that position depends on what happens next: the actual working arrangements, the evidence you gather and the consistency between the two.

If you want a professional review before your next engagement, or if you have received a status determination you want to challenge, our IR35 status review service covers both the written contract and the working-practices assessment needed to build a complete picture.