IR35 is the common name for the UK off-payroll working rules. They apply where a worker provides services through their own limited company or other intermediary, but would be treated as an employee for tax purposes if engaged directly. Where IR35 applies, income tax and National Insurance must be paid broadly as if the worker were employed.
How it works in a UK business
Since 6 April 2021, medium and large clients outside the public sector have been responsible for deciding whether the rules apply. They must issue a status determination statement setting out their conclusion and the reasons. If a client is small and outside the public sector, the worker's intermediary decides instead.
Status depends on the real working arrangements, including control, substitution and mutuality of obligation, not just the contract wording. HMRC's Check Employment Status for Tax tool can help with the assessment.
Why it matters for fractional directors
Fractional and interim directors often work through their own companies, so clients need to assess each engagement. Clear statements of work, genuine independence over how the work is done, and engagements with several clients all affect the analysis, which should be reviewed if the role changes.
Frequently asked questions
Who decides whether IR35 applies?
For medium and large private sector clients, and all public sector clients, the client decides and must issue a status determination statement with reasons. For small private sector clients, the worker's own limited company makes the decision. Agencies in the chain also have responsibilities where the rules apply.
Is every fractional director inside IR35?
No. Each engagement is assessed on its own facts. Factors such as how much control the client has, whether a substitute could be sent and whether the director is in business on their own account all matter. A careful assessment, documented at the start and reviewed if the role changes, is essential.
Last updated: 5 November 2026