Building Ironclad Outside IR35 Agreements

Getting your contract structure right isn't just paperwork it's your first line of defence in an IR35 determination. A well-drafted contract sets the foundation for an outside IR35 status, while a poorly written one can sink your position before you've even started work.  Here's how to structure contracts that genuinely reflect self-employed relationships.

Start With the Right of Substitution

Substitution is one of the most powerful indicators of self-employment. Your contract must clearly state you can send a substitute to complete the work.

Make it real, not theoretical:

• Name the process for proposing a substitute
• Specify who bears the cost (you should)
• Avoid requiring client approval unless there's a genuine security or competency reason
• Document that you maintain a pool of qualified substitutes



Don't let clients add vague clauses like 'subject to reasonable approval' without defining what 'reasonable' means. If the bar is too high, HMRC will see through it.

Define Control Carefully

The client will naturally need some control over what gets delivered. That's fine. What matters is how you deliver it.

Your contract should reflect:

• You decide your working methods and processes
• You set your own hours (within reasonable project parameters)
• You determine where you work
• You're not subject to the client's disciplinary procedures
• You're engaged for outcomes, not time

If the contract says you must work 9–5 at the client's office using their equipment and following their procedures, you're describing an employment relationship.

Equipment and Financial Risk

Genuine businesses use their own tools and accept financial risk. Your contract needs to demonstrate both.

Include provisions for:

• Your responsibility to provide necessary equipment and software
• Your liability for correcting defective work at your own cost
• Clear payment terms tied to deliverables, not time
• Your professional indemnity insurance requirements

A day rate doesn't automatically mean inside IR35, but couple it with no other business risk and you're on shaky ground.

Mutuality of Obligation

This one trips people up. You want to avoid creating an expectation of ongoing work.

Structure your contracts to:

• Cover specific projects or deliverables with defined end dates
• Avoid obligations to offer or accept future work
• Allow either party to end the relationship without notice (except during active projects)
• Separate each new piece of work with fresh terms

Don't let 'preferred supplier' arrangements creep into expectations of continuous work. Each project should stand alone.

Business-to-Business Language

The entire tone of your contract should reflect a commercial relationship between two businesses, not an individual hiring arrangement.

Use terminology like:

• 'The Contractor' or 'Service Provider' (not 'You will')
• 'Services' (not 'duties' or 'role')
• 'Engagement' (not 'employment' or 'appointment')
• 'Client' (not 'employer')

Language matters. Employment-style terminology signals employment-style relationships.

What to Explicitly Exclude

Sometimes what you leave out matters as much as what you include.

Your contract should NOT contain:

• Holiday pay or sick pay provisions
• Notice periods for termination (except for active project phases)
• Exclusive services clauses preventing other clients
• Integration into the client's organisation
• Employee benefits language
• Appraisal or performance review requirements

If these appear in your contract, push back. They're employment markers.

The Part and Parcel Test

HMRC looks at whether you're 'part and parcel' of the client's organisation. Your contract should emphasise separation.

Address these points:

• You're not entitled to employee benefits
• You're not subject to staff policies
• You invoice through your limited company
• You maintain separate business identity
• You can work for multiple clients simultaneously

The contract should make it obvious you're an external supplier, not a team member.

Payment Terms That Matter

How you structure payment affects your IR35 status more than you'd think.

Best practices:

• Invoice against deliverables or milestones where possible
• Include payment terms (e.g. 30 days from invoice)
• Show VAT separately
• Use your company name and details
• Avoid timesheet-based payment unless justified by the work type

If you're billing for deliverables completed, you're behaving like a business. If you're submitting timesheets to get paid for attendance, you're behaving like an employee.

Project Scope and Deliverables

Vague contracts create IR35 risk. Specificity protects you.

Define clearly:

• What you're delivering
• Success criteria
• Your responsibilities versus client responsibilities
• Intellectual property ownership
• Confidentiality requirements

The more your contract reads like a commercial services agreement, the better your position.

Working Arrangements vs Requirements

You'll often need to work with client teams or attend meetings. That's normal commercial practice. The question is whether you're required to work specific hours in specific places.

Frame these as:

• Reasonable cooperation for project success
• Client preference rather than requirement where possible
• Justified by the nature of the work (e.g. system downtime windows)

There's a difference between 'The Contractor shall attend the client's offices 9–5 daily' and 'The Contractor will coordinate availability to ensure effective project delivery'.

Get Professional Review

Don't rely on template contracts from the internet. IR35 rules are nuanced, and HMRC looks at the real working relationship, not just the paper contract. Have a qualified IR35 specialist or employment status lawyer review your contracts. The few hundred pounds spent upfront could save tens of thousands in disputed tax later.

The Reality Check

Here's the hard truth: a perfect contract won't save you if the actual working relationship contradicts it. HMRC looks at how you really work, not just what the contract says.

Your contract is the starting point. Make sure it's rock solid, then ensure your day-to-day working practices match what you've written.

Structure contracts that genuinely reflect business-to-business relationships. Include clear substitution rights, limit client control, demonstrate financial risk, and avoid employment-style language. Then work the way your contract describes