In the face of uncertainty, many organisations have defaulted to placing all contract roles Inside IR35. While this may appear to be the safer route, it is a blunt instrument, and one that often results in serious commercial and operational damage.

Blanket IR35 determinations might protect against perceived HMRC scrutiny, but in practice, they expose businesses to:

• Increased PAYE/NIC liabilities
• Loss of high-quality contractors unwilling to work Inside IR35
• Higher project costs through grossed-up day rates
• Reduced agility in workforce planning and project delivery

The Hidden Cost of Getting It Wrong

Let’s consider a real-world scenario.

A company assigned 15 engineering contractors a daily rate of £500. By wrongly defaulting all of them to Inside IR35, their cost per head rose to approximately £620 per day, factoring in Employer’s NI and umbrella company fees.

But in reality, only 7 of those roles were genuinely Inside IR35. The remaining 8 could - and should - have been assessed as Outside IR35.

The result?

£124,800 overpaid in just six months.

Now consider the broader implications when scaled across multiple departments and projects. The financial leakage from blanket Inside IR35 decisions can run into hundreds of thousands if not more. 

Here is a visual example:

Expert Partners Can Help

IR35 assessments are nuanced. The risks lie in oversimplifying them.

Working with specialist recruitment consultancies and reputable umbrella companies provides both compliance and commercial benefit:

• Recruitment Consultancies: We provide role-by-role insight based on scope, delivery model, and market practice, helping to determine the genuine IR35 status.
• Umbrella Companies: These can offer compliant payroll for Inside roles while advising on the impact of their structure on tax status.

Together, we help businesses avoid costly missteps and retain access to top contracting talent.

What You Can Do Now

Avoiding blanket decisions starts with an intentional, process-led approach:

1. Cease blanket Inside IR35 determinations.
2. Assess each role individually based on working practices and contract terms.
3. Use tools such as HMRC’s CEST, but don’t rely solely on them.
4. Document your decision-making process to defend your position.
5. Engage expert partners to guide your IR35 strategy.

Final Word

Defaulting all contract roles to Inside IR35 is a costly mistake. It leads to inflated costs, reduced access to skilled professionals, and hampers your workforce flexibility.

Make informed, individual determinations and document your approach. Not only will you reduce unnecessary tax exposure, but you'll also be able to engage the best talent on the right terms.

If you would like support with your IR35 determination process, contact us on info@murraymcintosh.com or call us on 01189 077583.