For contractors to assess themselves under the IR35 legislation, it is necessary to subdivide the key IR35 status factor of 'Control' into the 'when', the 'what', the 'where' and the 'how,' of 'Control,' writes David Harmer, a director at Markel Tax.
The four subdivisions of Control under IR35
The 4 Key Control Factors for IR35
- What — Control over what work is done
- Where — Control over where the work is performed
- When — Control over when the work is carried out
- How — Control over how the work is performed (most important)
Key Point: The 'how' of Control is the most significant factor in determining IR35 status, as it relates to the manner in which services are provided.
The 'what' of Control; usually the easiest IR35 subfactor…
Control over what is done is usually an easy factor to establish.
Normally, the engager will tell the worker what specific work/projects need to be done, with deliverables agreed between the parties.
The where aspect is generally dictated by the nature of the services, in which case this is of little use when determining IR35 status. While we would expect the contractor to be able to decide their place of work, often from a logistical point of view, the services have to be carried out from the client's site.
The 'when' of Control for IR35 purposes
Once a timeline for the provision of the services is established with the engager, typically a contractor should be left to their own devices to determine when they provide their services.
Though if the services will be provided from the client's site, it makes sense that the contractor will be bound to site opening times and the client's normal business hours, in which case this specific factor will also be of little use.
With IR35 & Control, 'how' does the heavy lifting
Most importantly, then, the contractor should determine how the services are provided.
Where this is not the case, the relationship with the engager will be more consistent with employment.
HMRC believes that the right within the contract need not be explicit — an implied right for the client to exert control is sufficient for this factor to be present.
IR35 & Control: case history origin
Any why this factor — Control — at all, to help determine IR35 status?
Well, the second test of Ready Mixed Concrete (RMC) outlined that the worker must be subject to control in a sufficient degree to make the other their 'master.'
Under IR35, what is the irreducible minimum?
Expanding on the RMC test, the Court of Appeal provided further guidance in Montgomery v Johnson Underwood Ltd [2001]:
"'Mutuality of obligation' and 'control' are the irreducible minimum legal requirements for the existence of a contract of employment."
Control in 2025-26, and in practice…
The key according to the courts, but in the eyes of HMRC in 2025-26 too, is that there must be a sufficient degree of control for IR35 to stick (under this factor).
In Market Investigations v Minister of Social Security (1968), the worker was found to be an employee of Market Investigations due to the level of control the company had over the worker being "extensive".
The company issued an "Interviewer's Guide" to the worker which had to be followed for her work to be of an acceptable standard. The courts found this sufficient in that Market Investigations determined how the work was carried out.
To be outside IR35, don't be tied hand and foot
Similarly, in Narich PTY Ltd v Commissioner of Pay-Roll Tax (1983), the individuals were found to be "tied hand and foot by the contract with regard to the manner in which" the work was performed. This tying stemmed from the 'guides' issued by the engager (which had to be followed) being detailed and prescriptive as to the how — the fourth and most important Control factor. In this case, the judge found that "the only possible conclusion" was that the individual worker was an employee.
Outside IR35 contractors provide small pieces of the jigsaw, and it's left to them
On the other hand, in First Word Software Ltd v The Commissioners For HMRC (2007), the Special Commissioner found that the contractor was not an employee as he:
"Was engaged to provide 'a small piece of a large jig saw' and the way in which that was done was left to him."
What HMRC says in IR35 cases about Control
It should be noted that HMRC takes the view that control cannot be relied on as a conclusive factor, especially when looking at highly skilled or specialist individuals.
Where a worker is an expert, even in an employment relationship, the employer is unlikely to be able to exert control as to how the individual carries out the work.
This logic is present within case law, in cases such as Morren v Swinton (1965), where the judge stated:
"Superintendence and control cannot be the decisive test when one is dealing with a professional man, or a man of some particular skill and experience."
The PGMOL (2024) case provided additional guidance that control can be exercised in both positive and negative means, and retrospective control — such as sanctions following the engagement — can be sufficient control for employment.
Further, the Supreme Court confirmed that demonstrating sufficient control consistent with employment is not confined to the right to give direct instructions to the individual, and is not confined to contractual rights.
If control (to a sufficient degree) is exercised in practice, this may be enough to deem this factor present.
With Control and IR35, what must contractors consider, per assignment?
In every engagement where operating outside IR35 is the intention, control must be considered within the context of the entirety of the circumstances.
And documents outside of the written contract must also be reviewed to ensure they do not impact the individual's right of (their own) control.
Examples of documents beyond the written contract include any 'induction packs' the worker might be handed, policies (such as conduct policies), procedures and/or apps that the individual is required to use as part of supplying the services.
Lastly, define 'sufficient degree of control' under IR35
There is no one-size-fits-all definition in or around the IR35 rules of what is a "sufficient degree of control." And arguably unhelpfully for contractors, this will depend entirely on the facts of each case.
Nonetheless, where the client is the party which determines specifically how the services are carried out, the engagement is likely to be more akin to employment.
So, although control on its own is not conclusive (the what, where, when and how), it is much harder to argue employment exists where the engager is not able to exert control over the manner in which the services are performed.
Author: David Harmer, Director at Markel Tax
