Reasonable Care

Helping you to understand what exactly reasonable care is and how it could affect IR35 status. 

Reasonable care explained

In order to comply with the off-payroll working rules, ‘reasonable care’ must be taken when determining IR35 status.



What constitutes 'Reasonable Care'?

So, what exactly is reasonable care when assessing IR35 status? HMRC define reasonable care as acting “in a way that would be expected of a prudent and reasonable person in the client’s position.”

As per the IR35 legislation, HMRC will take into account the circumstances of each case separately. Therefore, providing an independent view of each situation in which reasonable care could be questioned.

Let’s take a look at each of the examples HMRC gives that constitute reasonable care.



  1. Accurately applying and keeping a record of the employment status principles (ESM0500)
  2. This one appears to be relatively simple. In essence, any evidence that helps you reach a conclusion on IR35 status should be recorded and saved. When we talk about the things that help you reach a conclusion, we mean the ‘employment status principles’. These are the tests that are applied in order to determine status and can either be reflected through major status tests such as substitution or more minor tests such as financial risk. Whilst HMRC offer guidance for these status tests, we urge businesses to tread carefully as HMRC have faced criticism from industry experts and tribunal judges for their limited interpretation of case law upon which these principles (status tests) are based.

  3. Accurately completing HMRC’s Check Employment Status for Tax (CEST) tool
  4. According to HMRC, using CEST to determine IR35 status qualifies as part of the reasonable care requirement.

    Despite this, it is important to remember that CEST is by no means obligatory and there is no certainty that it will stand up in court. There have even been cases in the public sector such as with NHS Digital where they have used the CEST tool but still ended up having to pay back a substantial tax bill for results HMRC deemed to be incorrect. Because of this, we strongly suggest that you seek status review help from an independent third-party provider where possible.

  5. Applying HMRC guidance on determining status
  6. When considering the status tests for IR35, HMRC requires businesses to ‘fact find’. Put simply this means that when you are assessing IR35 status, you should consider the status tests of substitution, control, and mutuality of obligation not only for their individual merits but also their impact on the engagement as a whole.


  7. Seeking the advice of a qualified, professional advisor
  8. You do not have to spend all your working hours assessing IR35. In fact, it actually reflects positively on your business if you engage an independent third-party expert to help you make your status determinations.

    Consider the range of services we offer here at Qdos to help keep your business compliant.

  9. Having someone with a good understanding of the work to be undertaken involved in the determination process
  10. In essence, this means that the hiring manager should be involved in the process of determining IR35. Meaning that the person completing the determination should have a full understanding of both the engagement and how the contractor works in reality.

  11. Checking existing individual determinations to ensure they remain valid/accurate
  12. This is about having engagements reassessed regularly for their IR35 status. By doing so you can ensure everything is compliant throughout the entire engagement rather than just the beginning.

    HMRC placed importance on preparation here. You should be putting these processes into practice. Assessing currently engaged contractors will help you show you have taken ‘reasonable care’.

  13. Reviewing the processes being applied and amending for future determinations where necessary
  14. HMRC expects continual improvements in the manner with which IR35 is handled. This isn’t just about the short term, you should be looking to the future and considering ways to handle your IR35 compliance and processes over the coming years.

    Examples of fulfilling this requirement would be by making sure that your procurement processes are compliant, assessing your use of managed services, and ensuring your contracts are suitable.

  15. If there are any material changes to a worker’s terms and conditions, or working practices, making a new status determination
  16. This requires that you consistently ensure that the status determination always reflects the current reality of the engagement. So, if there are any material changes to the engagement then the status determination should be reassessed and updated accordingly. It is all about updating the Status Determination Statement to match the current reality of the engagement.

  17. Ensuring they check and review processes of other parties where they subcontract the determination process to another party. The client remains responsible for the accuracy of the SDS even if it subcontracts that responsibility to another party
  18. Regardless of whether you source your IR35 determination through a third party, HMRC remains resolute that the overall responsibility for determining IR35 status remains with the end client.

    This means that regardless of how you approach your IR35 assessments, you must as the end user, ensure that you are taking due diligence in ensuring its accuracy. With Qdos Status Review, all determinations require end-user authorisation prior to completion of the process.
Contractor browsing on mobile

IR35 Status Review

Assess the IR35 status of your off-payroll workers fairly and compliantly with the Qdos Status Review platform. We assess workers based on two decades’ of experience handling enquiries and completing assessments, and insure the risks involved whilst ensuring your obligations are met under the off-payroll working rules.
Contractor smiling

Lack of reasonable care and its consequences

So, what are the consequences of not taking reasonable care when assessing IR35 status?

It is simple really. If in the course of determining IR35 status, you are found to be neglecting reasonable care then the liability for IR35 will be transferred to you. In other words, you will become the fee-payer in the engagement.

What constitutes a lack of 'reasonable care'?

The following are examples of what HMRC has deemed not to constitute reasonable care. The following list is by no means exhaustive.

  1. Determining that every worker who provides their services through an intermediary is caught by the off-payroll working rules without giving any consideration to the specific facts of each individual case
  2. This is known in the industry as making ‘blanket’ IR35 assessments. In order to show reasonable care in assessing IR35 status, every individual contractor and engagement should be treated as having its own impacting factors and therefore having its own IR35 status.

  3. Determining that the off-payroll working rules apply to a large group of workers who have some variations between the work that is being carried out, without giving proper consideration to the different working arrangements for each worker
  4. Often referred to as ‘role-based’ assessments. Similar to the above point, without carrying out individual IR35 assessments, HMRC may infer that you have not taken reasonable care in making status determinations. Role-based determinations should only be used for preliminary status assessment when advertising for new roles.

  5. Failing to reconsider determinations where there has been a material change in circumstances
  6. IR35 is all about ongoing compliance. Where possible, you should continue to perform interim IR35 assessments for the entirety of the engagement. This is especially prudent should any material facts of the engagement change.

  7. An absence of any proper support or training within the organisation to enable those individuals responsible for making determinations to properly consider the off-payroll working rules
  8. Educating all parties is a sure-fire way to ensure every member of the supply chain knows their IR35 obligations. Whether using CEST or an independent third-party like Qdos, your staff should have a level of understanding and knowledge of the legislation and its principles to be able to sign off on any determinations, and also to understand the day-to-day implications of a contractor’s working practices.

    Check out the range of bespoke training courses we provide at Qdos here.

  9. Inputting inaccurate information into CEST
  10. This appears to come hand in hand with HMRC’s requirement for you to keep an updated record of their employment status principles. All evidence that relates to IR35 status or could impact the assessment of it should be recorded and should be considered in order to reach a final determination.

  11. The person tasked with completing the SDS does not possess the knowledge required to complete it and is not provided with the required level of support
  12. In order for an accurate IR35 status determination to be reached, it follows that the person submitting the assessment for review should be provided with both the support and information necessary to complete the SDS process. What is important here is that this person is fully aware of the true reality of the engagement and understands the determination process.

  13. The client subcontracts the SDS process to another party and does not confirm the accuracy of that conclusion and the reasons for it
  14. Neglecting to sign-off on the outcome of a SDS constitutes a lack of reasonable care. In order to be sure that the answers given are correct, client approval is required. In order to show reasonable care in this manner, you must review all answers given and, subject to the validity of these answers, either approve or reject the SDS outcome.

Through adding Qdos to Lorien’s expertise in project management and contingent workforce models, we are able to offer an all-in-one solution to clients that ensures maximum compliance in addition to competitive advantage.

Darren Topping

Have a question?

Book a discovery call with our team to find out what we can do for your business today

Prefer the old fashioned way?

Call our team on 0116 478 3390 or email [email protected]