IR35 for Civil Engineering Contractors | Inside vs Outside

Want to find out how a Civil Engineering contract role is deemed to be inside or outside IR35? Find out the legalities around IR35 below.

Whether a civil engineering contract role is inside or outside IR35 depends on your working practices, not just what the contract says. IR35 is UK tax legislation designed to assess whether a contractor is genuinely self-employed or should be taxed like an employee.

1. Who decides IR35 status in civil engineering?

Private sector (medium/large companies):

The end client is legally responsible for determining IR35 status.

Small private companies:

The civil engineering contractor is responsible.

Public sector:

The end client always decides.

The decision must be issued as a Status Determination Statement (SDS) before the civil engineering contract starts.

2. What determines whether a civil engineering role is inside or outside IR35?

HMRC looks at three main factors:

1. Control

Who decides how, when, and where the work is done?
More client control = more likely inside IR35

2. Substitution

Can you send a qualified replacement to do the work?
Genuine right of substitution = points outside IR35

3. Mutuality of Obligation (MOO)

Is the client obliged to offer continuous work?
Are you obliged to accept it?
Ongoing obligation = more likely inside IR35

Other considerations include:

Use of your own equipment
Financial risk
Integration into the client’s team
Length and exclusivity of the contract

3. How is tax treated if the role is inside IR35?

If a civil engineering contract is inside IR35:

You are taxed like an employee
Income tax and National Insurance are deducted at source
You are usually paid via:

PAYE, or
An umbrella company

You do not receive employee benefits (e.g. holiday pay unless via umbrella)Take-home pay is lower, but tax risk is minimal.

4. How is tax treated if the role is outside IR35?

If the role is outside IR35:

You are considered self-employed
You can operate through a limited company
You are responsible for:

Corporation tax
Dividend tax

You may claim legitimate business expenses
Higher take-home pay, but greater responsibility for compliance

5. Can a civil engineering role be wrongly assessed under IR35?

Yes. IR35 status can be challenged for a civil engineering role if:

The SDS is inaccurate
The working practices don’t match the determination
The role has been blanket-assessed without role-specific review

Contractors have the legal right to request a status review.

6. How can I protect myself as a civil engineering contractor?

To reduce risk as a civil engineering contractor:
Ensure your contract reflects real working practices
Keep evidence of independence (emails, contracts, substitution clauses)
Use professional IR35 assessments (these are usually provided in-house by the civil engineering recruitment agency)
Work with specialist civil engineering recruiters who understand construction and engineering IR35 nuances

Quick Summary

Inside IR35 = taxed like an employee, paid via PAYE/umbrella
Outside IR35 = self-employed, paid via limited company
Status is based on control, substitution, and obligation
The end client usually decides
Tax treatment depends entirely on the IR35 status

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