If you contract through a Personal Service Company (PSC) — most commonly UK IT contractors, but also management consultants, interim executives and project specialists — IR35 determines whether your engagement is treated as genuine self-employment (outside IR35) or as deemed employment (inside IR35). Since the April 2021 private-sector reform, the responsibility for the determination sits with the end client for medium and large companies. 4invoices makes the IR35 status of each invoice explicit so you can manage both flows correctly.
Tracking IR35 status per engagement
Each customer can be tagged with their IR35 status — outside (genuine business-to-business), inside (deemed employment), or pending (status determination awaited from the end client). When you issue an invoice, the status is locked to the engagement, so retrospective tax treatment is consistent. SDS (Status Determination Statement) documents can be attached per customer for audit.
Inside-IR35 income — payroll handover
If you're inside IR35, the deemed-employment income is taxed via PAYE at the deemed employer (typically the end client or an umbrella company) — you don't invoice for it directly, you receive net pay after deduction. 4invoices supports both modes: track inside-IR35 net income for completeness, and continue issuing real invoices for any outside-IR35 work running in parallel.
Outside-IR35 invoices to small clients (the 'small company' exemption)
Small clients (turnover under £10.2m, assets under £5.1m, fewer than 50 employees) are exempt from the IR35 reform — the determination sits with you, the contractor. 4invoices supports this scenario: you make the IR35 assessment per engagement (we provide a checklist based on CEST and case law factors) and the invoice reflects your determination.
IR35 mechanics — what 4invoices does and doesn't do
What 4invoices does: track the IR35 status of every engagement, separate deemed-employment income from genuine business income for tax purposes, store SDS documents and CEST assessments for audit, support invoicing for outside-IR35 work in the normal way (your PSC issues invoices to the end client, retains the gross, you take salary plus dividends in the standard tax-efficient mix).
What 4invoices doesn't do: make the IR35 determination for you (that's a legal and tax judgement based on your contract and working practices — your accountant or an IR35 specialist makes that call), administer payroll for inside-IR35 income (handled by the end client or umbrella company you work through), or replace your accountant in handling the year-end mix of salary, dividends, deemed-employment income and Corporation Tax.
For most contractors, the flow is: identify each engagement's IR35 status before invoicing, set it in 4invoices on the customer record, issue invoices for outside-IR35 work via your PSC, receive net pay for inside-IR35 work via PAYE (no invoice from you), and at year-end, hand the consolidated picture to your accountant for Self Assessment (your personal return covering salary + dividends + any other income) and Corporation Tax (your PSC's return covering business revenue minus deductible expenses).
Frequently asked
What's a Status Determination Statement (SDS)?
Since April 2021, medium and large end clients must issue an SDS for each off-payroll engagement, stating whether IR35 applies (inside) or not (outside). The SDS is a legal document — you can challenge it within 45 days if you disagree. 4invoices stores the SDS against the customer for the 6-year HMRC record-keeping period.
Should I use an umbrella company or my own PSC?
Personal preference. An umbrella company simplifies admin (they handle PAYE, you receive net pay weekly) but typically takes 4-6% of gross for the service. A PSC gives you control and the ability to take dividends, but you handle the admin (Corporation Tax, annual accounts, possibly Companies House filings). 4invoices supports both — PSC invoicing for outside-IR35 work, manual tracking of umbrella income for inside-IR35.
How do you handle the CEST tool?
HMRC's Check Employment Status for Tax (CEST) is an online tool that asks questions about your engagement and returns a determination. We don't replicate CEST internally (it changes periodically) but link to the official version and let you record the resulting determination + the date taken against each customer/engagement.
Set up IR35-aware invoicing today
Free trial. Add your PSC, tag your current engagements with IR35 status, issue your next invoice with the right tax treatment.