IR35 explained for care home and children's services employers. What it means for hiring interim registered managers, the 2026 threshold changes, and how Stephen James Consulting handles compliance on every placement.
What is IR35?
IR35 is another name for the off-payroll working rules. The term 'IR35' refers to the press release that originally announced the legislation in 1999. The rules are designed to work out whether a contractor is genuinely self-employed or a 'disguised' employee for tax purposes.
Contractors who set up and work through a limited company enjoy tax efficiency but don't usually receive employee benefits like holiday or sick pay — in exchange they have more flexibility and control over their work. The off-payroll working rules exist to stop arrangements where someone is, in practice, an employee, but is structured as a contractor purely for tax advantage.
A contract is tested as either:
Not automatically. It depends on the size of the engaging organisation and how the contractor is engaged. Small organisations (under current thresholds) are exempt from the 2021 reforms, meaning the contractor remains responsible for their own status determination. Medium and large organisations are responsible for making the determination themselves.
For medium and large organisations within scope, liability generally sits with the fee-payer in the supply chain, which may be the end client or an agency, depending on how the engagement is structured. From April 2026, HMRC will also be able to pursue the engaging organisation directly in certain circumstances where the agency in the chain is offshore or otherwise unable to meet the liability.
Does the 2026 threshold change affect us? If your organisation's turnover, balance sheet, or employee numbers are close to the small company thresholds, it's worth checking your status for the 2026–2027 tax year specifically. A provider that was previously "medium" under the old thresholds may now qualify as "small" and fall outside IR35 obligations.
Yes, and many do. But the engagement still needs a proper status determination if your organisation is within scope of IR35. We handle this as part of every interim placement we manage.
HMRC provides a free tool to help assess status: Check Employment Status for Tax (CEST). We recommend using this alongside professional advice rather than as a sole determining factor, particularly for complex or borderline cases.
If you need an interim registered manager or care home manager, we manage the entire IR35 compliance process as part of every placement, so you can focus on stabilising your service, not navigating tax legislation.
Read more about our interim management placements or submit a vacancy to get started.
