The IR35 Safety Audit
Is Your Contract a Target for HMRC?
HMRC doesn’t announce IR35 investigations. They land in your inbox as a “compliance check.” By that point, your contract is already their exhibit A.
The audit below covers the three tests HMRC uses to determine whether you’re inside or outside IR35 — and exactly what your contract needs to say to pass each one.
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Test 1: Right of Substitution
The question HMRC asks: Can someone else do your work?
Most contracts say nothing about substitution — or include a clause that requires client approval for any substitute. A substitution right that requires client approval is not a genuine right of substitution; it's a veto dressed up as a right. HMRC and tribunals consistently treat this as personal service, which points toward employment.
"The contractor may provide a substitute subject to the prior written approval of the client."
"The contractor may, at their own expense, provide a suitably qualified substitute. The client's right to refuse a substitute is limited to material lack of relevant skills and may not be exercised unreasonably."
Your audit questions
Does your contract give you an unqualified (or near-unqualified) right to provide a substitute?
Is the substitute paid by your company — not directly by the client?
Is the client's right to reject a substitute limited to material competence grounds only?
Test 2: Control Reality Check
The question HMRC asks: Who controls how, when, and where you work?
If the client controls your hours, workplace, and working method, you're functionally an employee. The most dangerous contract language: "The contractor shall provide services at such times and locations as the client requires." That sentence alone is a significant IR35 indicator. The contract needs to reflect how the engagement actually works — not what looks good on paper.
"The contractor shall attend the client's offices during core hours (9am–5pm) and shall work under the direction of the client's project manager."
"The contractor shall deliver the agreed outcomes set out in the Statement of Work. The contractor controls their own working methods, hours, and (where practicable) place of work. The client may specify the outcomes required but not the means by which they are achieved."
Your audit questions
Does your contract specify deliverables or outcomes — not hours worked?
Does it confirm you control your own working method?
Does it avoid language like "shall attend", "shall work under the direction of", or "shall be available during core hours"?
Do you work from your own premises at least part of the time?
Test 3: Mutuality of Obligation (MOO)
The question HMRC asks: Are you obliged to accept work, and is the client obliged to offer it?
Mutuality of Obligation is the hallmark of employment. If you must accept whatever work they offer, and they must keep offering it, you are not a contractor — you are an employee on a rolling engagement. The most dangerous clause: "The client shall provide sufficient work to keep the contractor engaged throughout the term." That is explicit MOO. It will be exhibit A in an HMRC investigation.
"The client shall provide a minimum of 4 days of work per week throughout the contract term. The contractor shall be available to accept any reasonable work requests during this period."
"Neither party is under any obligation to offer or accept future engagements beyond the current Statement of Work. Each assignment shall be documented in a separate Statement of Work agreed in advance."
Your audit questions
Does your contract state that neither party is obliged to offer or accept work beyond the current Statement of Work?
Is each project documented separately — not treated as a blanket rolling commitment?
Does the contract avoid language guaranteeing a minimum number of days or minimum workload?
Your IR35 status summary
One NO doesn’t automatically put you inside IR35 — HMRC applies all three tests together. But each gap is a point of attack. A well-drafted contract removes all three.
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