IR35 and Interim Lawyers: What You Need to Know

If you’re an interim lawyer working in the public sector, IR35 has likely been on your radar since April 2017. Originally introduced in 2000 to tackle tax avoidance by contractors using Personal Service Companies (PSCs), IR35 shifted dramatically when responsibility for determining tax status moved from the contractor to the client or agency.

What Is IR35?

IR35 aims to ensure contractors who would otherwise be employees pay similar taxes. If a PSC didn’t exist, HMRC argues the individual would be an employee and subject to PAYE deductions.

The 2017 Changes

Before April 2017, PSCs self-assessed their IR35 status. After the reform, public sector clients and agencies became responsible for assessing assignments—not the PSC itself. This change meant many roles previously outside IR35 were now inside, resulting in higher tax deductions.

Why Assignments Fail IR35 Tests

One key factor is substitution. If a client won’t accept a substitute without interviewing them, the role is likely inside IR35. This is common in public sector interim roles, where assignments often cover permanent vacancies rather than standalone projects.

Impact on the Market

The initial transition caused uncertainty, but the market adapted. Interim lawyers remain vital to the public sector, with thousands still working on complex, meaningful projects. While IR35 changed the financial dynamics, it hasn’t diminished the quality of work or the appeal of interim roles.

Looking Ahead

IR35 rules continue to shape contracting, and similar reforms have extended to the private sector. Understanding compliance and negotiating terms is essential for interim lawyers navigating this landscape.

For advice on IR35 and interim legal opportunities, contact our team today.