Around 14,000 UK companies reclassified as small for IR35 purposes when the new off-payroll thresholds took effect on 6 April 2026, according to HMRC guidance, and every one of them just watched the responsibility for status determination move somewhere else in the chain.
Gigapay is the Merchant of Record for creator payouts, the one vendor that pays your creators and campaign contractors on your behalf by taking on the compliance, payouts, and support so you don't have to.
What Gigapay will never tell you is that a Merchant of Record makes IR35 disappear, because it doesn't, and any vendor claiming otherwise is selling you an audit finding.
This article breaks down exactly what changed in April 2026, what finance still owns when paying UK limited-company contractors at scale, and where a payout Merchant of Record genuinely helps.
Key Takeaways
- Medium and large UK clients still determine IR35 status and issue Status Determination Statements.
- From April 2026, small-company thresholds rose to £15M turnover and £7.5M balance sheet.
- A Merchant of Record does not remove or decide IR35 status for you.
- Paying a limited company invoice never ends the IR35 analysis.
- Run the IR35 question first, then pick the payout path that matches it.
The 2026 IR35 Landscape: Two Rule Changes That Reshaped UK Contractor Payments
Two changes landed on the same day, 6 April 2026, and together they redrew the risk map for anyone paying UK contractors at volume.
New Small-Company Thresholds for Off-Payroll Working
The off-payroll working rules in Chapter 10, Part 2 of ITEPA 2003 only apply to medium and large end clients. Small companies are exempt, which pushes the status assessment back to the contractor's own personal service company under the original Chapter 8 rules. From 6 April 2026, a company counts as small if it meets at least two of these three criteria:
Source: Greenberg Traurig, "Threshold Changes to UK Off-Payroll Working Rules (IR35)", March 2026.
Two details matter for finance teams:
- First, size is assessed on the prior financial year, and a company must meet two thresholds for two consecutive financial years before its classification changes. In practice, most companies that reclassify as small will not feel the effect on their IR35 obligations until April 2027, because the 2026/27 test looks at earlier accounts.
- Second, if you sit above the thresholds, nothing about your obligations changed. You still determine status, you still issue Status Determination Statements, and you still carry the liability for getting it wrong.
Joint and Several Liability for Umbrella PAYE
The second change hits supply chains rather than direct engagements. From 6 April 2026, a new Chapter 11 of Part 2 ITEPA 2003 makes recruitment agencies, and in some cases end clients, jointly and severally liable for PAYE and National Insurance that a non-compliant umbrella company fails to remit.
HMRC's policy paper confirms it will pursue the relevant party in the first instance, without needing to exhaust remedies against the umbrella. HMRC estimates the reform affects roughly 30,000 agencies and 400 umbrella companies, in a market where around 700,000 people work through umbrellas and non-compliance was costing the Exchequer at least £500 million a year.
Put those two changes together and the message from HMRC is clear: employment status is an enforcement priority, and liability now travels up the chain toward whoever has money and records. HMRC recovered over £41 billion in compliance yield in FY2024, and employment status sits near the top of its target list.
Why Paying UK Limited-Company Contractors at Scale Got Harder in 2026
A single contractor engagement is manageable. One contract, one status assessment, one invoice a month. Creator campaigns and large contractor payment programs do not work like that.
A UK brand running influencer campaigns might pay 300 payees a quarter. Some invoice as individuals, some through their own limited companies, and some through agencies with umbrellas somewhere underneath.
- Each limited-company payee is a potential IR35 question.
- Each umbrella in the chain is now a potential joint liability.
And the money involved is not small: UK IT contractors on outside-IR35 terms command £450 to £650 per day for development roles, £600 to £900 for cloud architects, and £500 to £800 for project managers, with the market median around £450 per day.
A contractor on £500 per day working 220 days bills £110,000 a year. Fifty of them bill £5.5 million.
Finance teams feel this as three separate problems at once. Vendor master bloat, because every limited-company payee wants a supplier record. Documentation gaps, because chasing tax forms from 300 payees is nobody's full-time job until it becomes someone's full-time job. And classification risk, because a limited-company invoice arriving through accounts payable looks clean while telling you nothing about whether the engagement is actually inside IR35.
The UK regulator has also signalled where this goes next. HMRC is sending platform-data nudge letters to creators, and proposed payment-terms caps would tighten contractor payment windows from 60 to 45 days. The direction of travel is more scrutiny, faster payments, and cleaner records.
What Is IR35 and Who Must Determine Status in 2026?
IR35, formally the off-payroll working rules, decides whether a UK contractor who provides services through an intermediary, usually their own limited company, should be taxed like an employee. The question is never what the invoice says. The question is what the working relationship actually looks like.
The Three Status Tests HMRC Applies
HMRC and the tribunals weigh three main factors:
- Substitution: Can the contractor send a qualified substitute to do the work? A genuine right of substitution points away from employment.
- Control: Does the client control how, when, and where the work is done? Detailed briefs, fixed hours, and approval loops point toward employment.
- Mutuality of obligation: Is the client obliged to offer work and the contractor obliged to accept it? Ongoing mutual commitment points toward employment.
HMRC's CEST tool (Check Employment Status for Tax) gives a defensible record when used honestly with accurate inputs.
Who Makes the Determination
Since April 2021, the obligation sits with the end client when that client is medium or large. The client must assess each engagement, issue a Status Determination Statement to the contractor and the next party in the chain, and take reasonable care in doing so. If the engagement is inside IR35, the fee-payer must deduct PAYE income tax at 20%, 40%, or 45% and employee National Insurance at 8%, and account for employer National Insurance at 15% on earnings above the threshold.
When the end client is small under the new thresholds, the assessment reverts to the contractor's own company under Chapter 8, and the financial liability for a wrong call moves with it.
What Finance Still Owns Under IR35 in 2026
Here is the part your procurement pack should get right, because this is where vendors blur lines and legal teams kill drafts. When your company is a medium or large UK end client, four responsibilities stay with you no matter which payment platform you use.
Status Determination
The rules name the client as the party that must make the determination. You can buy tools, take counsel, and build assessment workflows, but the decision and the reasonable-care duty are yours. No payment vendor, no Merchant of Record, and no platform makes that decision for you.
Records
You own the audit trail: the Status Determination Statements, the CEST outputs or counsel opinions behind them, the contracts, and the evidence of how the engagement actually ran. When HMRC asks, "how did you decide this contractor was outside IR35," the answer needs to exist in your files, dated before the first payment went out.
Matching the Payout Path to the Determination
An outside-IR35 determination followed by a payment structure that treats the person like an employee undermines the determination. An inside-IR35 determination followed by a gross payment to a limited company creates unpaid PAYE. Finance owns the consistency check: the way money moves must match the status decision on file.
Refusing the Limited-Company Shortcut
A limited company invoice does not end the IR35 analysis. It starts it. IR35 exists precisely because an intermediary sits between the worker and the client, so the presence of that intermediary is the trigger for the assessment, never the answer to it.
Does a Merchant of Record Solve IR35?
A Merchant of Record does not erase, decide, or shield you from IR35.
If a UK brand's procurement pack asks "does your MoR solve IR35," the honest answer from any vendor should be no, and that includes Gigapay. IR35 looks at the facts of the working relationship between the worker and the end client.
Adding a payment intermediary changes who invoices whom. It does not change who controls the work, whether substitution is real, or whether mutual obligation exists. Those facts sit between you and the contractor, and they are the facts that decide status.
What an MoR changes is the operational and administrative layer around the payment: who the counterparty is, who collects documentation, who handles payout support, and how many vendor records your ERP carries. That layer is worth a lot at scale. It is not an IR35 opinion, and treating it as one is how drafts die in legal review and how deals die in due diligence.
What a Payout Merchant of Record Can Do for UK Contractor Payments
Once the IR35 question is answered and answered correctly, the operational problem remains: paying hundreds of people fast, with clean records, without turning your vendor master into a graveyard. That is the problem Gigapay is built for.
- Pay the person or their company at scale: One CSV upload or API call pays hundreds of payees across 65+ markets, using local rails like Faster Payments in the UK. Payouts are instant when pre-funded, and clients cover the fees on all new plans, so payees keep what they earn.
- Collect identity and tax documentation: Gigapay runs KYC and gathers the self-employment and tax documentation for every payee as part of vendor onboarding, so finance stops chasing forms one inbox at a time and the records exist when someone asks for them.
- Keep payees off your vendor master: Gigapay becomes the counterparty. Your ERP shows one vendor and one invoice per campaign instead of 300 supplier records, which is the difference between a finance team that scales creator programs and one that hires against them.
That is operations. It is valuable operations, and at volume it is the difference between campaigns launching this week or next month. It is still not an IR35 opinion, and Gigapay will not sell it as one.
How to Run the IR35 Question Before You Pay UK Campaign Payees
For UK campaign payees working through limited companies, the sequence matters. Run the IR35 question first, then choose the payment path that matches the answer.
Step 1: Assess status before the first payment
For each UK limited-company payee, make the determination while you are still a medium or large client, document it, and issue the SDS where required. Typical influencer engagements, with multiple clients, autonomous content creation, no fixed hours, and no exclusivity, will often sit outside IR35.
Tight control changes that: detailed content approval loops, exclusivity clauses, and directed working patterns pull an engagement toward employment.
Step 2: Inside IR35 means employment-style treatment
If the determination lands inside, the engagement needs payroll, an employer-of-record arrangement, or deemed-payment treatment as advised by your UK tax counsel. Do not route an inside-IR35 engagement through a gross contractor payout, on any platform.
Step 3: Outside IR35 means a contractor payout stack works
If the determination lands outside, and your records support it, a contractor payout stack handles the rest: onboarding, documentation, payment, and support. Gigapay can be that stack. We will not sell it as an IR35 shield, because it isn't one, and the buyers who close fastest are the ones who hear that sentence early.
Step 4: Re-check when facts change
A payee who started as a one-campaign collaborator and became a year-round retained creator with weekly deliverables has different facts now. Status determinations follow facts, so revisit them when engagements evolve.
The Cost of Getting IR35 Wrong in 2026
The numbers make the case for doing this properly better than any policy document.
An inside-IR35 engagement wrongly treated as outside leaves unpaid PAYE at up to 45%, unpaid employee NICs at 8%, and unpaid employer NICs at 15%, plus interest and penalties, and HMRC can look back years. On a £110,000 annual engagement, the unpaid tax and NICs alone can exceed £50,000 per contractor per year before penalties.
Across 50 contractors, published analysis of the new liability rules puts potential exposure above £500,000 for a single tax year of supply-chain non-compliance.
The joint and several liability rules sharpen this further for anyone with umbrellas in their chain, because HMRC now pursues the agency or end client directly, in full, with no reasonable-care defence written into the statute. And under the DMCC Act 2024, the CMA can separately fine up to 10% of global annual turnover for consumer-law breaches in influencer campaigns, which tells you how UK regulators currently view the creator economy: professionalized, monitored, and enforceable.
Against those figures, the cost of running determinations properly and keeping clean records is a rounding error.
What UK Procurement Packs Should Ask Payment Vendors About IR35
If you are the buyer, here are the questions that separate honest vendors from expensive problems:
- "Do you make or influence IR35 status determinations?" The correct answer is no. Walk away from any vendor that says yes.
- "What happens if we route an inside-IR35 payee through your platform?" A good vendor tells you not to and explains why.
- "What documentation do you collect per payee, and can we access it during an audit?" Identity, tax residency, and self-employment documentation should be collected at onboarding and available to you.
- "Who is the contractual counterparty, and how does that appear in our ERP?" One vendor of record with one invoice per campaign is the operational win. Confirm it is real.
- "Does your model change our obligations under Chapter 10?" No payment model changes a medium or large client's determination duty. A vendor that says otherwise has not read the legislation.
A vendor that answers these questions plainly is a vendor whose compliance claims you can trust elsewhere. That honesty closes deals, because the finance leaders signing these contracts have read the same HMRC guidance you have.
Conclusion
Gigapay is the Merchant of Record for creator payouts, the single counterparty that pays your creators and campaign contractors across 65+ markets while the tax documentation, payout operations, and payee support become our problem instead of yours.
IR35 in 2026 left status determination exactly where the 2021 reforms put it: with medium and large end clients, now defined by higher thresholds of £15 million turnover and £7.5 million on the balance sheet, and backed by joint and several liability rules that move unpaid PAYE up the supply chain.
Finance still owns the determination, the records, and the match between the status decision and the payout path, while a payout Merchant of Record owns the operational weight of paying hundreds of people correctly and fast.
If you are scaling UK campaign payments and want the operations handled by a vendor that tells you the truth about compliance, book a demo with Gigapay.
Read Next:
- E-Invoicing When the Payee Cannot Issue a Compliant Invoice
- Contingent Workforce Payouts: When You Need a Contractor Stack, Not an Employer of Record
- Procure-to-Pay Breaks on People: Why Services Payees Never Fit the PO–GR–Invoice Model
FAQs:
1. Does paying a UK limited company avoid IR35?
Paying a UK limited company does not avoid IR35, because the presence of an intermediary is what triggers the off-payroll analysis rather than what ends it. Status depends on the facts of the working relationship, including control, substitution, and mutuality of obligation, so a limited-company invoice never substitutes for a status determination.
2. Who must determine IR35 status in 2026?
The party that must determine IR35 status in 2026 is the end client, whenever that client is medium or large under the thresholds that took effect on 6 April 2026. When the end client qualifies as small, meeting two of the three criteria of £15 million turnover, £7.5 million balance sheet, and 50 employees, the determination reverts to the contractor's own company under Chapter 8 of ITEPA 2003.
3. Does a Merchant of Record solve IR35?
A Merchant of Record does not solve IR35, because status determination is a legal analysis of the relationship between the worker and the end client that no payment intermediary can change. A Merchant of Record handles the payout operations, documentation collection, and counterparty structure, which reduces administrative load and vendor sprawl but never replaces the client's determination duty.
4. Do US companies need to care about IR35?
US companies need to care about IR35 whenever the facts of an engagement connect to the UK regime, such as UK-based contractors, UK end clients in the chain, or work performed in the UK. The right move for any US company in that position is to get UK tax counsel on the specific facts rather than relying on a general conclusion, because the analysis is fact-dependent.
5. Is IR35 the same as Germany's KSK levy?
IR35 is not the same as Germany's KSK levy, because IR35 is a UK employment-status tax regime while the KSK is a German social-security contribution charged to companies commissioning artistic and creative work. The two regimes have different triggers, different liable parties, and different obligations, so conclusions about one never transfer to the other.
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