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Does a Substitution Clause Always Mean You’re Outside IR35?


The right to substitution is often thought of as a “magic bullet” that kills off the idea of personal service, meaning that a contractor will automatically fall outside IR35. The truth is, predictably, far more complex and in this article we’ll examine the right to substitution in detail, and explain when it is indeed likely to shoot down personal service, and when it isn’t.

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A requirement for personal service means that you, as the contractor, must complete the work yourself and would usually indicate that you’re inside IR35. If you have the right to send a substitute instead of attending yourself, this is a strong indication that you’re outside IR35. Unfortunately, just having the word “substitute” in the contract is not enough to produce this effect. 

Does it exist in practice?

The courts can and will ignore a substitution clause if they believe it could not be used in practice. Obviously, your position will be stronger if you’ve actually used a substitute, but an unused right to substitution may still be effective as long as it’s “practical and plausible”.

Even if you’ve used your right to substitution, it may still be ineffective in some circumstances so it’s important to know and understand the details.

Is it fettered or unfettered?

This is a question of whether there are conditions attached to the substitution clause. The right of substitution can be provided in a fettered or unfettered clause. An absolute unfettered right of substitution is inconsistent with personal service, indicating that you’re in business on your own account and outside IR35. Equally, a fettered right will render the substitution clause invalid as an indication of self-employment.

A substitution clause may still be effective where the client has the right to ensure the substitute is qualified and capable. In this case the question is whether the client only has the right to check the substitute’s qualifications, or whether the substitution clause requires their consent.

Do you have to be unable to work?

Your substitution clause can be found to be ineffective if it requires you to be unable to provide your services. The inference here would be that if you can supply your services then you must. In this circumstance, the substitution clause becomes an emergency measure, and not inconsistent with personal service.

For the clause to be effective, you should be able to send a substitute when you are either unable or unwilling to supply your services personally.

Who arranges and pays the substitute?

If the client arranges for and/or pays the alternative worker, this is replacement rather than substitution. To count as substitution, and to be effective for IR35 purposes, the substitute must be working as a representative of your limited company. They should be chosen by you, and paid by your company . The client should pay your company as normal for services provided by the substitute.

Does the client have the right to reject your substitute?

As we said earlier, it’s reasonable to allow the client to have procedures in place to ensure a worker is qualified and capable, and to reject the substitute if they’re not.

However, if the right to substitution depends on the client giving their consent, the clause may not indicate self-employment.

A pre-approved pool of workers

If the substitute must be chosen from a pre-approved pool of workers, this effectively means the client’s consent is required but is given in advance, and this would usually indicate that you’re inside IR35.

CEST and Substitution

HMRC’s Check Employment Status for Tax (CEST) tool reflects HMRC’s interpretation of substitution, which doesn’t always agree with the courts. For example, in the question about whether the client has the right to reject a substitute, CEST states:

A client will have the right to reject a substitute if:

  • The contract specifies that the worker will perform the work and is silent on substitution
  • The hirer has an explicit right to reject a substitute
  • The worker can only provide a substitute from a pre-approved pool of workers

However, if the contract is silent on substitution, but a substitute has been used in practice, personal service is unlikely to apply.


Substitution is an important factor which must be considered when determining IR35 status, but in order for it to be truly effective in indicating an outside IR35 status, you must:

  • Have an unfettered contractual right to substitute
  • Have the right to send a substitute if you are either unable or unwilling to provide the services
  • Select and pay the substitute yourself

If you don’t have a right to substitution

If you don’t have a right to substitution, this does not necessarily mean you’re inside IR35. As always, the situation must be considered as a whole, and the questions or control and mutuality of obligation may indicate that you’re outside.

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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