What is IR35 and Why Should You Care?
If you're a self-employed locksmith working regularly for the same client, or if you run a small locksmith business and hire contractors, IR35 is something you need to understand. It's not new, but the rules have tightened since April 2021, and they're still being enforced hard by HMRC.
IR35 is tax legislation designed to stop people dodging employment taxes by pretending to be self-employed when they're effectively employees. For locksmiths, this usually means: if you work exclusively for one company (like a facilities management firm), you're controlled by them, work their hours, use their equipment, and follow their processes, you might be caught by IR35 even if you have your own limited company.
The Real Risk: Being Inside IR35
Being 'inside IR35' means HMRC considers you an employee in all but name. You'll owe National Insurance contributions at employee rates, and your client becomes responsible for deducting tax at source. Your take-home pay drops significantly.
Let's use a real example. Say you're a locksmith working through your limited company, contracted to a commercial property management client on a 12-month rolling contract. You attend their sites three days a week, use their van, wear their uniform, and report to their operations manager. You bill them £400 per week. If HMRC determines you're inside IR35, you won't be getting that full £400. Your client will deduct roughly £90 in tax and National Insurance, leaving you with about £310. You'll also lose the benefit of dividend allowances and other self-employment tax breaks.
The Status Test: How HMRC Judges You
HMRC uses a framework called the 'Status Test'. It's not a rigid checklist. Instead, they weigh several factors:
- Control. Who tells you what to do, when, and how? If your client controls your working methods and hours, that points to employment.
- Substitution rights. Could you send another locksmith to do the job if you couldn't attend? If you must do it yourself, that's a sign of employment.
- Mutuality of obligation. Is your client obliged to offer you work, and are you obliged to accept it? Employment contracts have both. One-off contracts don't.
- Integration. Are you integrated into the client's organisation, attending team meetings, using their systems, wearing their branding? Integration suggests employment.
- Equipment and tools. Who provides them? If the client does, that's a factor toward employment.
- Right to manage. Can you subcontract work to others, or must you do it personally?
- Financial risk. Do you have genuine financial risk, or is your income guaranteed?
None of these factors is decisive on its own. HMRC looks at the whole picture.
Common Scenarios for Locksmiths
Scenario one: You're a solo locksmith with your own van and tools. You work for multiple clients on job-by-job basis. You control your schedule, choose which jobs to take, and set your rates. You're almost certainly outside IR35. There's no control, no integration, genuine financial risk, and flexibility on both sides.
Scenario two: You work for a large facilities company as a contractor. You're on their payroll system, attend their site five days a week, report to their supervisor, use their equipment, and they require you to be there during set hours. You invoice them weekly. You're almost certainly inside IR35. The control, integration, and lack of substitution rights are clear markers of employment.
Scenario three: You're contracted to a property management firm for emergency locksmith call-outs. You work on-call, you use your own van and tools, you choose whether to accept each job, and you work for other clients too. You're probably outside IR35. You have control, financial risk, substitution rights (another locksmith could cover your calls), and no integration into their workforce.
What's Changed Since 2021?
Before April 2021, employees bore the burden of checking their IR35 status. Now, the responsibility sits with the client or the agency arranging the contract. If you're working through a limited company and someone hires you, they must make a determination about your status and tell you in writing. That's called an 'off-payroll working' notification.
For locksmiths, this means if you're contracting to larger organisations, you're more likely to receive a formal status decision now than you would have five years ago. That's actually helpful, because at least you know where you stand.
The Cost of Getting it Wrong
If HMRC investigates and finds you've been incorrectly treated as self-employed when you're inside IR35, you'll owe back taxes, National Insurance, and penalties. Interest runs from the original due date. For a locksmith earning £25,000 a year through a contract later deemed inside IR35, the back bill could easily reach £8,000 to £12,000 over three years, plus interest and penalties on top.
Your client could face penalties too, which is why larger organisations are now more cautious about their contractor determinations.
Practical Steps You Should Take
First, if you're contracting regularly for one client, ask for their IR35 determination in writing. If they haven't done one, push them to. You need clarity.
Second, document your actual working arrangement. Keep records of your communications, invoices, and the day-to-day reality of how you work. This matters if HMRC ever questions things.
Third, consider your contract terms carefully. If you want to stay outside IR35, your contract should explicitly mention your right to substitute another locksmith, your freedom to work for other clients, and that you control your own methods and hours.
Fourth, don't rely on what a client tells you. If they say you're outside IR35 but the facts suggest otherwise, HMRC won't accept the client's word as a defence.
The Bottom Line
IR35 isn't going away. It's a permanent feature of the tax landscape for contractors. For locksmiths, the key is understanding whether you're genuinely self-employed (outside IR35) or genuinely an employee in disguise (inside IR35). If you're inside IR35, accept it and factor the tax cost into your pricing. If you're outside, protect that status by maintaining genuine independence in how you work. Get professional advice if your situation is unclear. An accountant experienced in contractor tax costs around £200-300 for a consultation but could save you thousands if they help you avoid costly mistakes.
