IR35 determines whether a contractor working through a PSC should be taxed as an employee. Agreements must reflect genuine independence: substitution rights, no mutuality of obligation, and control by the contractor.

• IR35 applies if engagement looks like employment
• PSC must receive an SDS (Status Determination Statement) from the client
• Key tests: substitution, control, mutuality of obligation
• Holidays, sick pay, and notice period language must be avoided
• Indemnity clauses shift IR35 liability risk to client if SDS incorrect

Legal reference: Income Tax (Earnings and Pensions) Act 2003; IR35/Off-payroll rules 2021