IR35 Guide for Fractional Executives
Understanding off-payroll working rules and how to structure compliant fractional engagements.
Important Notice
This guide provides general information only. Always seek professional advice from qualified tax advisors and employment lawyers for your specific situation.
What is IR35?
IR35, officially known as the off-payroll working rules, are designed to determine whether a contractor working through an intermediary (such as a limited company) would be considered an employee if working directly for the client.
The rules aim to ensure that individuals who work like employees pay similar tax and National Insurance contributions, regardless of the structure through which they provide their services.
Key Tests for IR35 Status
1. Control
Who controls how, when, and where the work is done?
- Outside IR35: You control your working methods and schedule
- Inside IR35: Client dictates how work must be performed
2. Substitution
Can you send someone else to do the work?
- Outside IR35: Right to send a qualified substitute
- Inside IR35: Must personally perform all work
3. Mutuality of Obligation
Is there ongoing obligation beyond the specific contract?
- Outside IR35: No obligation to provide/accept future work
- Inside IR35: Expectation of ongoing work relationship
Why Fractional Executives Are Often Outside IR35
Fractional executives typically have several factors that support outside IR35 status:
- Multiple clients: Working across 2-3 organizations simultaneously
- Strategic focus: Providing high-level strategy rather than day-to-day operations
- Flexible working: Setting own schedule and working methods
- Defined outcomes: Working to specific deliverables rather than time-based tasks
- Business risk: Taking responsibility for delivering results
Best Practices for Compliant Engagements
Contract Structure
- Clear statement of work
- Defined deliverables
- Right of substitution
- Notice periods
Working Practices
- Set own schedule
- Use own equipment
- Multiple clients
- Strategic focus
Status Determination Statements (SDS)
For medium and large organizations, the client must provide an SDS before the engagement begins:
- Assessment must consider all relevant factors
- Must be provided before work starts
- Can be challenged through formal process
- Client takes financial responsibility for incorrect determinations
HMRC Tools and Resources
Need IR35 Support?
All fractional executives in our network are pre-assessed for IR35 compliance. We provide guidance and documentation support throughout the engagement process.