IR35 by Industry and How It Applies to Different Sectors

IR35 is the same legislation for everyone. The tests for employment status don't change based on your industry. Control, substitution, and mutuality of obligation apply just as much to a software developer as they do to a construction worker or a medical locum.

But in practice, IR35 plays out very differently across industries. HMRC scrutinises some sectors far more heavily than others. Working practices that are standard in one industry might be red flags in another. What counts as genuine self-employment varies significantly based on the type of work you do.

Understanding how IR35 applies specifically to your industry matters. The generic guidance is useful, but knowing the particular risks, common pitfalls, and standard arrangements in your sector helps you structure contracts properly and avoid the mistakes HMRC is actively looking for.

Why Industries Matter for IR35

IR35 legislation is industry-neutral. It asks the same questions about your working relationship regardless of your profession. But industries have different typical working patterns, different client expectations, and different norms around contracting.

These industry norms affect how HMRC assesses status. A software contractor working on-site full-time for six months looks suspicious. A construction worker doing exactly the same thing looks completely normal. Context matters. HMRC also targets certain industries more aggressively than others. They know where the high volumes of contractors are. They know which sectors have historically been aggressive about tax planning. They know where the money is. Some industries have clear guidelines and established case law. Others are murkier because fewer cases have been tested in tribunal. Your industry's IR35 history shapes your risk profile.

IT and Software Development: The High-Risk Sector

IT contractors face more IR35 scrutiny than almost any other sector. HMRC knows this is where massive volumes of limited company contractors operate, and historically many arrangements have been borderline.

Why IT gets targeted

The contractor population is enormous. Tens of thousands of IT contractors operate through limited companies, representing billions in potential tax revenue if HMRC can bring them inside IR35.

IT roles often involve working on-site at client premises for extended periods. Six-month, twelve-month, even multi-year contracts at the same location are common. This pattern looks like employment.

IT contractors frequently work embedded in client teams, using client equipment, following client processes, and attending team meetings. Integration into the client organization is high.

Many IT contracts have been deliberately structured to appear outside IR35 while working practices suggest otherwise. HMRC has seen every attempt to dress up employment as contracting.

IT specific risk factors

Working through client IT service desks rather than your own support infrastructure. Using company email addresses, company laptops, company software licenses. Being listed on organizational charts alongside permanent employees. Attending daily stand-ups, sprint planning, retrospectives where someone else directs what you work on. Following the client's development methodologies without deviation. Having your code reviewed and approved by client staff.

Being assigned to a specific team with a line manager who directs your work, even if they're not technically your manager. Participating in performance reviews or feedback sessions. Having objectives set by the client rather than agreeing deliverables.

Working exclusively for one client for years on rolling contracts. No gaps between contracts, automatic renewals, expectation on both sides that the relationship continues indefinitely.

What works for IT contractors

Project-based contracts with defined deliverables rather than time-based day rates. Contracts for specific outcomes like "migrate system X to platform Y" rather than "provide development services."

Genuine substitution arrangements. If you can send another developer from your company to cover when you're unavailable, and the client accepts this, that's strong evidence of self-employment.

Working remotely most of the time by choice, not just during pandemic restrictions. Setting your own hours. Using your own equipment and development tools where possible.

Having multiple clients, even if one client provides most of your income. Demonstrating you're a functioning business with business development activities, not just a person contracting to avoid employment.

Clear autonomy over technical decisions. The client specifies what they want achieved, you determine how to build it. You're the expert, they're buying your expertise.

Construction and the CIS Confusion

Construction has its own tax scheme, the Construction Industry Scheme (CIS), which confuses many people into thinking it replaces IR35. It doesn't.

CIS vs IR35

CIS is a tax withholding scheme. Contractors working in construction register with CIS. When contractors or subcontractors pay each other, they withhold 20% (or 30% if unregistered) and pass it to HMRC. This is advance payment of tax, not final settlement.

IR35 sits on top of CIS. You can be registered with CIS and still be inside IR35. CIS deals with how tax gets collected. IR35 determines if you should be paying employee tax rates.

Many construction contractors incorrectly assume CIS registration means they're outside IR35. It doesn't. HMRC can and does investigate construction contractors for IR35 compliance separately from CIS.

Construction industry patterns

Construction contractors often work on-site by necessity. You can't build a house remotely. Being on-site doesn't automatically put you inside IR35 in construction the way it might in IT.

Using client materials and equipment is standard. A builder uses the materials the client has purchased for the job. This doesn't indicate employment in construction the way using client equipment might in other sectors.

Short-term projects are common. A plastering job might take two weeks. A plumbing fix might take three days. This project-based nature supports outside IR35 status if properly structured.

Construction red flags

Working for a single main contractor permanently, just moving between their different sites. You're not finding your own projects, they're assigning you work. That looks like employment.

Being supervised by the main contractor's site manager who directs how you do your work. Taking instructions about methods rather than just agreeing outcomes. Following their health and safety processes because they require it, not because you've chosen to align with them.

Getting paid hourly or daily rates rather than fixed prices for completed work. Price per job supports self-employment. Time-based payment looks more like employment.

Being part of the main contractor's team with no separate business identity. No business cards, no signage on your van, no marketing to other clients. Just one contractor supplying you with continuous work.

What supports outside IR35 in construction

Fixed-price contracts for specific work. You price the job, quote it, and deliver it for that price. If it takes longer than expected, that's your problem. That's business risk.

Your own public liability insurance, your own tools, your own transport. You're clearly running a business with business costs.

Multiple clients throughout the year. Even if you do several jobs for one builder, you also work for homeowners, other contractors, different projects.

Clear project boundaries. Each job has a start and finish. When it ends, there's no assumption of more work. The next project is negotiated separately.

Medical Locums and Healthcare Contractors

Medical professionals working as locums face particular IR35 challenges because of how healthcare services operate.

NHS and private healthcare differences

NHS locum work is usually coordinated through agencies or direct with trusts. The public sector IR35 rules applied to the NHS from 2017, four years before private sector rules changed. NHS trusts have been assessing locum status for longer.

Private hospitals and healthcare providers became subject to off-payroll rules in April 2021. Many initially struggled with assessments, often defaulting to inside IR35 determinations for simplicity.

Locum doctor and nurse considerations

Medical professionals often face high control because of clinical governance. You must follow hospital protocols, prescribing guidelines, and safety procedures. This is non-negotiable for patient safety.

HMRC and tribunals recognize that some control is inherent to medical practice. Following clinical guidelines doesn't automatically mean you're inside IR35 if other factors support self-employment.

Substitution in medical roles is complex. You can't just send any random doctor. They need appropriate qualifications, registrations, and sometimes specific experience. But if you can provide a suitably qualified substitute from a pool of professionals, that supports outside IR35 status.

Medical locums often work through their own limited companies providing services to agencies who supply to trusts. This chain needs proper IR35 assessment at each level.

What HMRC looks for in healthcare

Are you working fixed shifts like permanent staff, or do you choose when to work? Can you decline shifts without consequences, or is there an expectation you're available?

Are you integrated into rotas as if you're permanent staff, or are you covering specific gaps? Do you attend team meetings, participate in department planning, and get involved in non-clinical activities?

Do you have your own indemnity insurance, or are you covered under the hospital's insurance like their employees? Own insurance suggests self-employment.

Are you working long-term contracts at a single location, or doing varied placements across different facilities? Variety and project-based work support outside IR35.

Medical profession specifics

GPs covering locum sessions often have better IR35 positions because they're clearly providing short-term cover with high autonomy. You're using your clinical judgment, seeing your own patients, working independently.

Hospital doctors on long-term locum contracts often struggle. If you're covering a vacant consultant post for twelve months, attending MDT meetings, supervising juniors, and generally acting like the permanent consultant would, that looks like employment.

Nurses and allied health professionals face similar issues. Permanent shift work, following ward routines, being supervised by ward managers—all of these point towards inside IR35.

Teachers and Academic Contractors

Education contractors, from supply teachers to university lecturers, have particular IR35 considerations shaped by how educational institutions operate.

Supply teachers

Most supply teachers work through agencies. Short-term placements covering sickness or temporary vacancies are common. This project-based nature supports outside IR35 status.

But long-term supply covering maternity leave or permanent vacancies looks different. If you're doing exactly what a permanent teacher does for a full term or longer, that's harder to argue as outside IR35.

Control in teaching is high by nature. You follow the national curriculum, the school's behavior policies, the department's scheme of work. Some level of direction is inevitable. HMRC recognizes this context.

What matters is if you have autonomy over how you teach. Can you use your own methods, or must you follow prescribed lesson plans? Do you have flexibility over your approach, or are you told exactly what to do?

University and FE college lecturers

Academic contractors often have stronger outside IR35 positions because of the autonomy inherent in the role. You're hired for your expertise. You design and deliver your own course content. You assess students using your professional judgment.

Substitution is realistic. If you can't deliver a lecture, you can often arrange for a colleague to cover. This happens regularly in academia.

Multiple institutions is common. Many academic contractors work for several universities simultaneously, delivering different courses. This clearly demonstrates you're not dependent on one employer.

Education sector risks

Being timetabled like permanent staff with fixed hours and locations. Having your work supervised and directed by department heads. Following institutional procedures with no autonomy.

Working exclusively for one institution for years. Attending staff meetings, doing administrative tasks, supervising dissertations—all the things permanent staff do alongside teaching.

Being assessed through appraisal processes like employees. Having performance managed. Being required to complete professional development activities the institution mandates.

Financial Services Sector

Financial services contractors, particularly in banking, insurance, and professional services firms, face heavy IR35 scrutiny.

Why finance gets attention

High day rates mean significant potential tax revenue. A banking contractor on £800 per day inside IR35 represents substantial additional tax compared to outside treatment.

Major financial institutions were early adopters of contractor workforces. HMRC knows there are thousands of contractors across the big banks and has made this sector a priority.

Post-2021 off-payroll rules implementation, many financial institutions applied blanket inside IR35 determinations to avoid liability risk. This has pushed many contractors towards umbrella companies or permanent roles.

Finance sector patterns

Long contracts are typical. Six months to two years at major institutions is standard. The long duration makes these look like permanent roles.

Working on-site at client premises using their equipment, security passes, email systems. High integration into client operations.

Following strict client procedures because of regulatory requirements. Financial services is heavily regulated, and contractors must comply with client policies.

Finance contractor considerations

Can you genuinely refuse work or projects within your contract? Do you negotiate what you work on, or are you assigned tasks like an employee?

Do you have specialist expertise the client doesn't have, or are you doing work their permanent staff could do if they had capacity?

Are you working on a defined project, or are you part of business-as-usual operations? Project-based work supports outside IR35. BAU work looks like permanent staff.

Public Sector Has Strictest Application

Public sector has been under off-payroll rules since 2017. Government departments, NHS, local councils, and public bodies have the longest experience with IR35 determinations.

Public sector characteristics

Many public bodies defaulted to inside IR35 determinations across the board after initial difficulties with assessments. Getting determined outside IR35 in the public sector is harder than private sector.

Public sector procurement processes can make genuine self-employment difficult. Rigid frameworks, standardized terms, high governance requirements all create control structures that suggest employment.

Public bodies are risk-averse. When uncertain, they determine inside IR35 to protect themselves from liability. This has pushed many skilled contractors away from public sector work.

Public sector opportunities

Specialist consultancy work, particularly time-limited projects with clear deliverables, can still be outside IR35. You're brought in for specific expertise, you deliver a defined outcome, you leave.

Professional services where you're clearly more expert than the client staff and you're making decisions based on your professional judgment rather than following directions.

Other Sectors Worth Noting

Marketing and creative services

Project-based nature of campaigns and creative work supports outside IR35. You're hired to deliver a specific outcome. High autonomy over creative decisions. Can often substitute with other creatives from your agency.

Risk: Being brought in to fill a vacant marketing manager role long-term rather than deliver a project. Attending team meetings, managing permanent staff, doing BAU marketing activities.

Accountancy and professional services

Clear project work (year-end accounts, audit, specific advisory projects) supports outside IR35. You're using professional expertise to deliver defined services.

Risk: Becoming embedded in finance teams doing day-to-day bookkeeping or accounts work that permanent staff would normally do.

Engineering

Similar to construction. On-site work using client facilities is often necessary and doesn't automatically indicate employment. Project-based nature supports outside IR35.

Risk: Long-term contracts where you're essentially filling a permanent engineering role indefinitely.

Logistics and transport

Owner-drivers with their own vehicles, own insurance, taking on route risk have strong outside IR35 positions. You're genuinely running a transport business.

Risk: Driving company vehicles, working exclusively for one logistics company long-term, being dispatched and managed like employed drivers.

Adapting Your Approach to Your Industry

Understanding general IR35 principles is essential, but you need to apply them within your industry context.

Research tribunal cases in your sector. What patterns led to inside determinations? What factors supported outside status? Learn from others' experiences.

Understand what's normal in your industry versus what's a red flag. On-site work might be fine in construction but risky in IT. Following procedures might be unavoidable in healthcare but negotiable in consulting.

Structure your contracts to reflect genuine self-employment within your industry's realities. Don't fight industry norms, work with them while maintaining the key features of genuine business operations.

Network with other contractors in your sector. What are they seeing? How are clients assessing status? What contract terms are working? Industry-specific knowledge is invaluable.

Consider sector-specific professional advice. A contractor accountant who specializes in IT contractors understands your sector better than a generalist. Similarly for construction, medical, or other specialized fields.

The Risk Profile of Your Industry

Some sectors are simply higher risk for IR35 challenges than others. IT, financial services, and public sector contractors face the most scrutiny. Construction, education, and healthcare have particular considerations. Other sectors see less HMRC attention but still need proper compliance.

Your industry's risk profile should inform how carefully you structure arrangements, how much evidence you maintain, and how conservative you are with borderline situations.

High-risk sectors need belt-and-braces contracts, meticulous documentation of working practices, and professional review of IR35 status. Being casual about compliance in IT contracting is asking for trouble.

Lower-risk sectors still need proper attention to IR35, but you're less likely to face investigation if you're operating reasonably. Don't ignore compliance, but recognize your risk level is different from IT contractors.

Understanding where your industry sits in HMRC's priorities helps you allocate appropriate time and resources to IR35 compliance. Not paranoid, not complacent, just appropriately careful based on actual risk.

Making It Work in Your Sector

IR35 applies to everyone, but it looks different across industries. What matters is understanding how the core principles of control, substitution, and mutuality of obligation play out specifically in your type of work.

Learn from your industry's history with IR35. Study the tribunal cases. Understand what HMRC scrutinizes in your sector. Know the common pitfalls and how to avoid them.

Structure your contracts and working practices appropriately for your industry while maintaining genuine self-employment characteristics. Don't fight reality, work within it.

If your industry faces high scrutiny or has particular challenges, invest more in professional advice and proper compliance. The cost of getting it wrong is higher for you than contractors in lower-risk sectors.

Your industry context doesn't change IR35 law, but it significantly affects how that law applies to you. Understanding this distinction is crucial for operating successfully as a contractor in any sector.