The Latest on IR35: What Contractors & Employers Need to Know in 2025

Understanding IR35 in 2025

IR35 has long been a source of confusion for contractors and employers alike — and while the fundamental rules haven’t changed dramatically in recent months, HMRC’s enforcement activity has. In this article, we’ll break down the current status of IR35, highlight common risks, and explain what both contractors and hiring organisations need to stay compliant this year.

What Is IR35? (Quick Recap)

IR35 is designed to prevent tax avoidance by individuals working through an intermediary (like a limited company) while effectively operating as an employee. If you’re deemed “inside IR35”, HMRC expects income tax and National Insurance to be paid as if you’re an employee — even if you’re invoicing via your own company.

Since 2021, medium and large private sector clients have been responsible for determining IR35 status — not the contractor. However, small companies (as defined by Companies Act thresholds) are still exempt from these requirements.

What’s New in 2025?

While there have been no legislative changes to IR35 in 2025 (at the time of writing), there are three important developments to be aware of:

1. Increased HMRC Scrutiny

HMRC has ramped up its review of IR35 determinations — particularly where blanket “outside IR35” assessments are being used across roles. Businesses should expect a tougher stance, especially in tech, media, and financial sectors.

2. IR35 Tribunal Rulings

Recent tribunals have shown that actual working practices are still the deciding factor — not just what’s written in a contract. This means if you’re treating someone like an employee (supervision, control, equipment, etc.), you could still fall inside IR35 regardless of contract language.

3. Off-payroll Working Tool: Limitations

HMRC’s CEST tool remains controversial. While it provides some clarity, it doesn’t cover mutuality of obligation — a key IR35 test. Using CEST alone is not a defence if HMRC disputes your assessment.

What Employers Need to Do

• Review roles individually — Avoid blanket determinations.
• Assess working practices — Look beyond the contract wording.
• Keep evidence — Justify each IR35 determination with written reasoning.
• Work with experts — IR35 reviews are now essential for high-risk or grey-area roles.

What Contractors Should Watch For

• Understand your client’s size — If they’re a small company, you are responsible for determining your own IR35 status.
• Request the SDS (Status Determination Statement) if applicable.
• Challenge unclear assessments — You have the right to dispute an SDS within 45 days.
• Keep your house in order — Ensure your own contract and working arrangements support your IR35 position.

How SIA Can Help

At SIA, we offer detailed IR35 contract reviews for both contractors and employers. We assess working practices, documentation, and contract language — and provide written advice you can rely on. With HMRC scrutiny rising in 2025, now is the time to get compliant and stay protected.

Need an IR35 Review?

Speak to our team today to get clear, professional advice tailored to your role or business.

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