IR35 and data centre contractors: a practical hiring guide
Contracting arrangements need to be understood before rates are advertised or a specialist is mobilised. IR35, also known as the off-payroll working rules, can affect responsibilities across the client, recruiter, fee payer and contractor. This guide explains what to ask, without attempting a tax-status decision for any particular engagement.
Identify the contracting chain first
Record the end client, any agencies, the fee payer and whether the worker supplies services through a personal service company or another intermediary. Responsibilities differ depending on the size and type of client and the engagement structure.
HMRC guidance says public-sector clients and medium or large private-sector clients generally make status determinations for relevant engagements through intermediaries. Different arrangements apply for small private-sector clients. Check current rules rather than relying on an old template.
A title or day rate does not settle status
Calling a contractor "outside IR35" or paying an invoice from a limited company is not, by itself, a status determination. The agreement and actual working practices matter. Relevant considerations can include control, substitution and the overall relationship, assessed as a whole.
The client should take reasonable care where it is responsible for determining status and issue the required reasoned status determination statement.
Understand pay and fee-payer obligations
Confirm who deducts tax and National Insurance where applicable, what the quoted day rate means, whether an umbrella company is involved and which party operates payroll. Compare offers on a like-for-like basis, including working days, holidays, expenses and employer costs where relevant.
Review changes during the assignment
A scope change can alter the actual working practices. If a contractor is moved from an agreed deliverable to ongoing line-management duties, the parties should review whether the original assessment remains appropriate. Record significant changes, contract variations and discussions.
Brief recruiters and contractors accurately
Before a search begins, provide the intended engagement model, expected working practices, authorised decision-maker, programme location and contractual chain. Avoid advertising a tax treatment that has not been established. Use up-to-date HMRC guidance and qualified professional advice for uncertain cases.
Official guidance
This is general information, not tax or legal advice. Check the latest HMRC material and obtain appropriate advice for a specific engagement.
Frequently asked questions
Who decides IR35 status?
For relevant engagements through intermediaries, public-sector and medium or large private-sector clients generally have that responsibility; small private-sector arrangements can differ.
Can we call a job outside IR35 before a determination?
Do not present an unsupported status claim. Review the actual contract and working practices and follow the applicable determination process.
Does an agency remove the client’s obligations?
Not necessarily. Roles in the supply chain should be identified, including responsibility for the determination and, where relevant, operating payroll.