IR35 Status Tests Explained: Control, Substitution, MOO

There is no single statutory definition that decides IR35. Instead, courts and tribunals apply the common law tests for employment status, asking: if you strip away the personal service company, would the relationship between the worker and the end client be one of employment?

The analysis proceeds in stages. First, the hypothetical contract between worker and client is identified. Second, that contract is examined against the employment status tests. Third, and finally, the wider picture is assessed to determine whether the overall relationship is consistent with genuine self-employment. This three-stage approach was confirmed by the Supreme Court in PGMOL v HMRC [2024].

Personal service: the gateway test

Before any other test applies, the worker must be obliged to perform the services personally. If the contract allows the worker to supply anyone capable of doing the job - a genuinely unfettered right to substitute - the threshold requirement of personal service may not be met at all, and employment status may not arise.

Most IR35 cases assume personal service is present, because most contractors are engaged specifically for their skills and cannot readily supply an alternative person without the client's consent. The substitution right therefore typically features not as a gateway argument but as a control indicator.

Mutuality of obligation (MOO)

MOO asks whether there is a mutual obligation between the parties that goes beyond the immediate contract. In an employment relationship, an employer has an ongoing obligation to offer work and pay the employee, and the employee has an obligation to accept that work.

The PGMOL v HMRC [2024] Supreme Court ruling significantly clarified this area. The Court confirmed:

• Every binding contract has a “basic” or “irreducible minimum” of MOO - simply the obligations to do and pay for the agreed work. This baseline MOO is necessary but not sufficient to establish employment.
• What matters is whether there is an enhanced MOO: an obligation to provide and accept work beyond the current engagement, an expectation of continuity, or a commitment that the worker will not work for competitors during the engagement.
• The absence of enhanced MOO - for example, where each contract is a discrete piece of project work with no expectation of follow-on engagement - is consistent with, though not proof of, self-employment.

Control

Control is often described as the central pillar of employment status. It encompasses three dimensions:

• Method: Does the client dictate how the work is done - specific tools, processes, methodologies, or order of tasks?
• Time: Does the client specify when the contractor works - fixed hours, attendance requirements, or mandatory availability windows?
• Location:Does the client require the contractor to work in a specific place - at the client's office, on the client's equipment?

A contractor who must follow the client's processes, attend the client's office on fixed days, and use the client's tools scores poorly on all three control dimensions. Conversely, a specialist brought in to solve a specific problem using their own methods, working flexibly at their own location, scores well.

The courts also consider the rightto control, not just whether it is exercised. A client who could direct the work if they chose to - even if they typically leave the contractor to their own devices - may still have the legally relevant “irreducible minimum” of control.

Substitution

A genuine right to send a substitute in your place - without the client's approval of the specific individual - is one of the strongest outside-IR35 indicators. It directly contradicts personal service: if the client engaged the skills, not the individual, the arrangement is consistent with self-employment.

Following Atholl House v HMRC [2022], the Court of Appeal confirmed that a contractual right to substitute can be given weight even if it has never been exercised, provided the right is genuine and would be commercially practicable. HMRC cannot simply dismiss an unused substitution clause as a sham without evidence that it does not reflect the real terms of the engagement.

In practice, substitution rights are often limited. Clients frequently include “subject to client approval” caveats that, while commercially understandable, weaken the outside-IR35 argument. A clause requiring client approval of a substitute is not the same as an unfettered substitution right, though some approval-based clauses may still be given weight depending on how broad the approval discretion is.

Business on own account (BOOA)

BOOA is the final-stage, holistic test: does the overall picture of the worker's situation look like that of a genuine independent business, or like that of a disguised employee? The PGMOL judgment confirmed that even where the primary tests are ambiguous, the BOOA assessment can be decisive.

Factors that support a strong BOOA case include:

• Working for multiple clients concurrently
• Having a business website, branded stationery, or a distinct business identity
• Carrying professional indemnity and public liability insurance
• Providing your own equipment and tools
• Bearing genuine financial risk - for example, fixing defects at your own cost, or absorbing losses if a project overruns
• Bidding for fixed-price deliverable projects rather than simply selling time
• Marketing your services to find clients, rather than working through a single agency

Secondary (integration) factors

Even where the primary tests are neutral, integration indicators can tip the balance. These ask: is the contractor part of the client's organisation, or clearly outside it?

• Listed in the client's staff directory or org chart
• Has a client email address
• Attends internal meetings not open to external suppliers
• Receives employee perks (subsidised canteen, gym, parking)
• Has a permanent desk or permanent pass
• Is described internally as a “resource” rather than a supplier

These factors are rarely conclusive on their own but can reinforce an inside-IR35 finding where the primary tests are also pointing that way.