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Determining your IR35 status: Mutuality of Obligation


Mutuality of Obligation (MOO) is one of the key tests for employment used to determine whether a contractor is employed for tax purposes (Inside IR35) or in business on their own account (outside IR35). Whether MOO is present or not can be a complex question, and each case has to be considered individually.

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What is Mutuality of Obligation?

Some level of mutuality of obligation will exist in any contract. For example, you would expect a contractual obligation for you to complete the work and for your client to pay you for it, but in this context, we’re concerned with the presence or absence of specific obligations that would be present in an employment contract. Where this level of MOO can be shown to exist, it’s a strong indication that you are inside IR35.

There is sufficient mutuality of obligation to indicate employment where:

  • An end client has an obligation to provide paid work
  • The contractor is obliged to accept and complete work when offered

This is the normal state of affairs in employment relationships, where the employee is paid for their time on an ongoing basis, and can be deployed according to the employer’s priorities. This is exemplified in employment contracts by the standard phrase “and any other duties as required”.

If you’re contracting through a limited company outside IR35, you would expect to be engaged to perform a specific task. When this task is complete you would expect to move on to a new contract, which may or may not be with the same client.  

HMRC’s interpretation of MOO and IR35 status

HMRC have repeatedly attempted to claim that MOO exists wherever a worker is obliged to complete work and the client is obliged to pay them, and their published guidance confirms this belief. Since this level of obligation exists in self-employed engagements as well as employment relationships, they don’t believe it’s a useful test for determining employment status.

It has also led to their online IR35 status tool, Check Employment Status for Tax (CEST) being criticised for giving incorrect results, most often because it doesn’t test for MOO.  

When reality and the written contracts differ

It’s obviously important that your contract doesn’t contain strong enough mutuality to indicate employment, but as with the other employment status tests, the written contract is only part of the story. Even where the contract explicitly states a lack of obligations, it’s still possible for MOO to exist in practice.  

For example, it’s possible to inadvertently allow MOO to be demonstrated in your working practices, by accepting additional work outside the scope of the contract without amending or re-negotiating.

Dependence on a single client

Where you work for just one client for a long time, for example by having your contract renewed over and over again so you stay in the same position, this could create an expectation that work will be offered and you will accept – making the relationship appear more like employment. This effect can be more pronounced where you have a long notice period, or the contract prevents you from working for other clients at the same time.

There is no single answer to determining employment status, and MOO is just one of several tests that are applied in IR35 determinations. Each case is different, and the weight attached to MOO changes depending on the circumstances. This is why IR35 determinations require specialist expertise. We strongly advise anyone contracting through their own limited company to get each new contract assessed by an independent IR35 expert, to make sure they’re working under the correct status.

If you have any questions, or if we can help in any way, please call our expert team on 01296 468 483 or email


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