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Most contractors who think seriously about IR35 have had their contract reviewed. A specialist looks at the substitution clause, the control provisions, the mutuality of obligation wording, and tells them it reads outside IR35. That review has genuine value. A contract that says the wrong things is a problem in its own right.

But a contract review is only half the picture. The other half is whether the way you actually work reflects what the contract says. When those two things diverge, UK tribunals have been clear about which one takes precedence.

What the courts established in Autoclenz

Autoclenz Ltd v Belcher [2011] UKSC 41 is the Supreme Court decision that governs this question. The facts were striking. Car valeters at Autoclenz had written contracts describing them as self-employed. Those contracts included a substitution clause (they could send someone else to do the work) and a clause stating there was no obligation on either side to offer or accept work. On paper, the arrangement looked self-employed.

In practice, none of it applied. The valeters worked full time, exclusively for Autoclenz, under the company's direction. No one had ever sent a substitute. The no-obligation clause was meaningless because turning down work meant losing the arrangement entirely.

The Supreme Court held that the written terms did not reflect the true agreement between the parties. Where that gap exists, tribunals must determine the actual arrangement from how the relationship operates in practice. Crucially, they do not need to find that the contract was a deliberate sham in the strict legal sense. The lower bar is simply that the written terms do not match reality.

For IR35 purposes, the implication is direct. HMRC and employment tribunals applying the IR35 tests from Ready Mixed Concrete (South East) Ltd v Minister of Pensions [1968] 2 QB 497 assess the true arrangement, not the arrangement described in your contract. A beautifully drafted outside-IR35 contract applied to an inside-IR35 working relationship offers little protection.

Why CEST misses this entirely

HMRC's Check Employment Status for Tax tool (CEST) asks you questions and takes your answers at face value. If you say you have a right of substitution, CEST records that you have a right of substitution. It has no mechanism for probing whether that right has ever been exercised, whether the client would genuinely accept a substitute, or whether the clause exists because a solicitor put it in and no one has ever tested it.

This is one of the most significant structural weaknesses in CEST, and it is one reason the tool returns an indeterminate result in approximately 22% of cases (a figure confirmed via Freedom of Information request). A contractor describing their working practices honestly might get a different result from one who describes their contract terms instead. CEST cannot distinguish between the two.

Tribunals can. And when they do, the Autoclenz principle means the honest description carries more weight.

The gap that costs contractors

The most common version of this problem looks like this. A contractor has a contract with a substitution clause. In practice, the client engaged them because of their specific expertise and would not accept anyone else. The clause exists but is hollow. When HMRC investigates, the absence of any genuine substitution history (no records of even offering a substitute, no evidence the client would have agreed) means the clause carries little weight.

Similarly with control. A contract might say the contractor determines their own working methods and hours. If in practice the contractor attends client standups every morning, follows sprint planning set by the client's team lead, and works on client premises using client equipment, the contract clause describing independent working does not reflect the true arrangement.

HMRC v Professional Game Match Officials Ltd [2024] UKSC 29 reinforced the direction of travel here. The Supreme Court's approach to mutuality of obligation in that case made clear that the factual reality of each engagement matters, not just what the parties say was intended. Status turns increasingly on the in-business picture as a whole: what actually happened, not what the contract said would happen.

What working practices tribunals look at

When HMRC investigates an IR35 case, or when a contractor disputes a Status Determination Statement, the factual enquiry typically covers:

Substitution. Has a substitute ever been sent? Would the client have accepted one? Is there any correspondence, invoice, or record showing the substitution right is real rather than notional?

Control. Who decides how and when the work is done? Does the contractor follow client processes, use client project management tools, or attend client team meetings as a regular team member?

Equipment and premises. Does the contractor use their own equipment, or does the client provide it? Do they work from their own premises or the client's offices?

Integration. Does the contractor have a client email address, appear on the client's internal directory, attend social events, or otherwise present as part of the permanent team?

Exclusivity and duration. Is this the contractor's only engagement, or do they have concurrent clients? How long has the engagement run? Long, exclusive relationships with a single client make the in-business-on-own-account argument harder to sustain, as established in Atholl House Productions Ltd v HMRC [2022] EWCA Civ 501.

Financial risk. Does the contractor bear genuine financial risk, for example fixing defects at their own cost, or pricing by deliverable rather than day rate?

None of these questions are answered by the contract. They are answered by what actually happened.

Practical implications for contractors

The Autoclenz principle has three practical consequences worth understanding.

First, a contract that says outside IR35 is necessary but not sufficient. It sets the baseline. What matters equally is whether your working practices are consistent with it.

Second, the divergence between contract and practice is something HMRC actively looks for. An outside-IR35 contract that has never been tested (where the substitution right is a clause rather than a lived reality) is a soft target in an investigation.

Third, and most importantly: if your working practices are drifting away from your contract, that is something to address before HMRC asks, not after. In practice this means keeping records, exercising rights that exist on paper (including at least attempting substitution, even informally), and reviewing your working arrangements regularly rather than treating the initial contract review as a one-time exercise.

Checking your own position

The starting point is identifying whether a gap exists between your contract and your working practices. The questions worth asking yourself:

• ·Has the client ever seen or agreed to a substitute performing your work?
• ·Do you set your own hours and methods, or do you follow client direction?
• ·Whose equipment are you using to do the work?
• ·Do you have other clients alongside this engagement, or have you been exclusive for an extended period?
• ·Would someone observing your day-to-day work distinguish you from a permanent employee?

If the honest answers to those questions point in a different direction from your contract, the Autoclenz principle suggests a tribunal would follow the honest answers.

IR35 Verdict's contract scanner analyses your contract across six IR35 dimensions grounded in case law, then runs a reality check questionnaire that flags where your working practices might undermine what the contract says. The divergence flags in the output are based directly on the Autoclenz principle: they identify the places where paper and practice are likely to diverge, and where HMRC attention would land first.

Run your contract and working practices through the checker

Not ready to upload your contract yet? You can get the free IR35 Contract Red Flags Checklist by email. It includes a section on the working practice mismatches that most often contradict what a contract says, so you can document your position before HMRC asks.

Get the free IR35 contract red flags checklist

If your working practices point inside and you are challenging an inside IR35 determination, the evidence you gather here is exactly what a well-argued challenge relies on.

Related reading

• ·Right of Substitution and IR35: What It Takes: how tribunals assess whether a substitution clause is genuine
• ·Is CEST Accurate?: why CEST's face-value approach misses the Autoclenz problem
• ·CEST vs Tribunal: Why IR35 Answers Can Differ: how the same engagement can produce opposite results