Hi all,

I'm researching IR35 for my CPD at the moment, and wondered if we could have a little discussion here to compare our understandings of it. has a very comprehensive section on IR35, including various measures you can implement to clarify that your contract is not one of employment, and techniques to reduce the risk of a company being investigated in the first place.

But I'm a little confused on the use of the term 'service company', which crops up time and again in IR35-related guidance and discussions but with little explanatory text.

I can see, for example, that a limited company set up for a freelancer would qualify as 'a business wholly or mainly providing the services of an individual to other persons' (, but I'm unclear as to whether a company qualifies as a service company if it employs more than one individual.

For instance: if a plumber called Joe trading through Joe Bloggs Ltd does mostly domestic work on a supply and fit basis, there's little threat from IR35. However, if a considerable amount of his time was spent as a subcontractor for one specific building contractor, then he would need to be very careful to monitor his contract and way of working.

Alternatively, if he and his son Mike traded jointly as J & M Bloggs Ltd, and they both worked as subcontractors for the same building contractor, how would things look from an IR35 point of view?

Would we say Joe and Mike sidestep IR35 due to the fact that their company is no longer a *Personal* Service Company (no longer the 'services of AN individual', but rather individuals), or would IR35 look at the worker and still argue that both father and son are each employees and therefore would both have to apply IR35 on their income?

A lot of guidance I can find seems more focussed on what determines an IR35-able contract rather than an IR35-able company.


  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,069
    It's a good question.

    The one-man-band IT contractor Ltd Co is clearly a 'service company' for IR35 purposes.

    Your one man plumber company working as a subbie - yes, I would sugegst usual IR35 concerns need looking at.

    If two people were in the Ltd, but on the same conditions - it's a really good question. I like to think I'm pretty well up on IR35 and employment status issues, but this one has me stumped. I am sure HMRC would consider IR35 in this case and come up with an argument for it, so I would want to see a decent contract in place to protect them (as long as it accurately reflects the genuine working practices) even though potentially having two people on the company may offer a level of protection.

    Generally conditions for self employed subbies in CIS are that of non-employees (as the contractor has to declare that they are not employees on the CIS return) and so I would assume that any subbie offering his services through a company should be working under the same conditions and are therefore fairly IR35 resistant - though contracts are advisable nevertheless.

    As to whether Joe and Mike need to tick the "service company" box on the P35 - I don't know.
  • Raging PineapplesRaging Pineapples Well-Known Registered Posts: 110
    I did some more research, and I strongly suspect that the mere fact that J & M Bloggs Ltd have multiple employees would not provide them any real IR35 protection by itself.

    The situation of J & M Bloggs Ltd would sit squarely in the middle of the definitions of a Personal Service Company and a Managed Service Company. HMRC can apply IR35 to Managed Service Companies which set up a company and place several employees inside it as shareholders just as much as they can to a Personal Service Company with just the one employee. So I suspect the argument would be that IR35 appears to apply more to the worker-client relationship rather than business-client.

    That's how I see it anyway. May be wrong!
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,069

    That's how I see it anyway.
    That makes sense to me. Best to err on the side of caution in respect of contracts anyway.
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