Contractors affected by IR35
IPSE estimates approximately 500,000-600,000 UK contractors work through limited companies and are potentially in scope for IR35 status assessment.
Public-sector reform (April 2017)
Since April 2017, public-sector clients determine IR35 status (not the contractor). HMRC research showed significant increases in "inside IR35" determinations in the public sector following this reform, with tax revenue increases in the hundreds of millions per year.
Private-sector reform (April 2021)
Since April 2021, medium and large private-sector clients (those meeting the "small company" exemption thresholds — turnover under £10.2m, balance sheet under £5.1m, employees under 50) also determine status. Small private clients still have contractors determine their own status.
Umbrella company adoption
Following the private-sector reform, many contractors previously operating through their own Ltds moved to umbrella-company arrangements. Precise figures aren't published centrally but industry estimates suggest hundreds of thousands of contractors currently work through umbrellas.
HMRC's CEST tool
HMRC's Check Employment Status for Tax (CEST) tool is the official status-determination tool. Its results are used by both public and private-sector clients making status determinations. Industry criticism has focused on cases where CEST returns "unable to determine" — approximately 15-20% of cases per HMRC's own published data.
Sources
UK legislation to prevent 'disguised employment' via personal service companies. Determines whether a contract is really employment (inside IR35) or genuine self-employment (outside).
No. IR35 only applies to workers providing services through a limited company (or similar intermediary). Sole traders are outside its scope.
Depends on client size. Small private-sector clients — the contractor. Medium/large private-sector or any public-sector — the client.
Related: Contractor vs Employee UK 2026 — Side-by-Side Comparison — from FreelanceToolkit UK.