consultant ir35 continues to affect how consultants in the UK operate, particularly those working through limited companies. As HMRC strengthens its enforcement efforts, consultants must take proactive steps to ensure they are fully compliant. The IR35 landscape has changed significantly over the years, and 2025 brings even greater scrutiny, especially for consultants working in sectors such as IT, finance, engineering, construction, healthcare, and professional services.

For many consultants, staying compliant involves understanding HMRC expectations, ensuring that contracts reflect genuine self-employment, and working with reliable support providers such as The Infinity Group, who offer payroll, IR35, and compliance assistance. This article outlines essential IR35 compliance tips for consultants looking to operate confidently in 2025.

Understand the Core Principles of IR35

Before taking any practical steps, consultants must understand the fundamental purpose of IR35. The legislation is designed to prevent disguised employment, where an individual works like an employee but operates through a limited company to gain tax advantages. HMRC assesses working arrangements based on actual practices, not just what the contract states.

The three major tests of IR35 status include:

• Personal service

• Control

• Mutuality of obligation

A consultant must evaluate their working style, client relationship, and contract against these tests to determine whether the engagement is inside or outside IR35.

Ensure the Contract Accurately Reflects Working Practices

One of the most important IR35 compliance steps is having a contract that clearly represents how you work. Any discrepancies between the written agreement and day-to-day practices may lead to an IR35 challenge.

A compliant outside IR35 contract typically shows:

• No requirement for personal service

• Freedom to send a substitute

• Limited managerial control from the client

• No ongoing obligation for work beyond the project

• Independence in how tasks are completed

• Provision of your own equipment where appropriate

Consultants should regularly review their contracts as laws evolve, and many choose providers like The Infinity Group to assist with contract clarity and IR35 alignment.

Demonstrate the Right to Provide a Substitute

The substitution clause is one of the strongest indicators of operating outside IR35. It shows that the consultant’s company, not the individual, is being contracted. HMRC examines whether substitution is a genuine right, not just wording added to the contract.

To increase compliance:

• Ensure the contract clearly states the ability to provide a substitute

• Maintain a documented process for how substitution could occur

• Make sure clients agree to this clause without conditions that make it impossible

Even if substitution is not exercised, having a genuine capability strengthens an outside IR35 position.

Maintain Independence and Control

A consultant who works with significant autonomy is more likely to be outside IR35. HMRC reviews how much control a client has over:

• What work is done

• How it is completed

• When it is completed

• Where it is completed

Consultants should maintain independence by:

• Setting their own working methods

• Avoiding integration into company teams as though they were employees

• Not using client equipment if avoidable

• Agreeing only to project-based outcomes, not daily work instructions

Clients may provide high-level requirements, but consultants should retain control over execution.

Avoid Mutuality of Obligation

Mutuality of obligation refers to the expectation that the client will provide continuous work and that the consultant must accept it. For outside IR35 engagements, the relationship should be project-based, not ongoing employment.

To strengthen IR35 compliance:

• Avoid open-ended contracts

• Specify clear deliverables and project milestones

• Ensure there is no obligation to accept additional work

• End the contract after project completion before renegotiation

A consultancy-style working pattern supports a strong outside IR35 stance.

Keep Detailed Records and Documentation

Documentation is essential when defending IR35 status during HMRC reviews. Consultants should maintain:

• Copies of all contracts

• Evidence of substitute availability

• Project plans and deliverables

• Invoices showing project-based payment

• Records of working hours, tools used, and work locations

• Insurance documentation

• Business website and marketing materials

These records demonstrate that you operate as a genuine business, not an employee.

Use Professional IR35 Status Assessment Tools

HMRC offers its own tool, CEST, but many consultants find it limited. Independent IR35 review tools or professional assessments help provide a clearer understanding.

Consultants increasingly rely on:

• Expert contract reviews

• IR35 specialists

• Annual status checks

• Ongoing monitoring when working with multiple clients

The Infinity Group supports consultants by reviewing contracts, assessing risk areas, and advising on compliance measures to ensure HMRC expectations are met.

Consider Working Through an Umbrella Company if Necessary

Some consultants prefer to avoid IR35 risks altogether by working through umbrella companies. Under an umbrella model, the consultant becomes an employee of the umbrella provider, and IR35 no longer applies.

This option is useful when:

• Contracts are clearly inside IR35

• The consultant wants simplicity in payroll and taxes

• Multiple short-term contracts make limited companies inefficient

The Infinity Group provides umbrella payroll services that ensure tax compliance, proper deductions, and timely payments for consultants who choose this route.

Review Each Engagement Separately

IR35 status applies to each contract individually, not to the consultant as a whole. A consultant may work outside IR35 for one client and inside IR35 for another. Each contract must be assessed based on:

• Working conditions

• Client control

• Contract content

• Actual practices

Consultants should not assume that one correct IR35 status determination applies to all future engagements.

Work With Reputable Compliance and Payroll Experts

Finally, working with experienced professionals can significantly reduce IR35 risks. Providers like The Infinity Group assist consultants by:

• Reviewing contract terms

• Advising on correct IR35 statuses

• Providing payroll services for inside IR35 contracts

• Offering umbrella company solutions

• Supporting overall HMRC compliance

• Ensuring consultants remain aligned with up-to-date legislation

Professional support helps consultants avoid penalties, maintain tax efficiency, and strengthen their business practices.

Conclusion

IR35 compliance is essential for consultants operating in 2025, especially as HMRC continues to focus on identifying disguised employment. Consultants must understand IR35 rules, review contracts regularly, keep documentation in order, demonstrate independence, and ensure actual working practices match the contract. Whether working outside IR35 through a limited company or choosing an umbrella payroll model, consultants can benefit from expert guidance.