Outside IR35 isn’t making a comeback in 2026/27 — it’s something more complex

Following ContractorUK's article on whether 2026 would see the return of the outside IR35 contractor, there has been growing discussion about outside IR35 contracting making a comeback.

The conversation has included a post from a contractor accountant, who works directly with contractors setting up as limited companies and who noticed a rise in new one-person company formations for day-rate roles. Plus, there was a post from a former recruiter for IT staffing firm Matchtech, who heralded outside IR35 as making a “quiet comeback” by arguing that HMRC’s new Joint & Several Liability rules for umbrella companies are shifting the “calculation” back towards outside IR35 engagements.

While a quick look at the UK’s temporary IT labour market may suggest an outside IR35 comeback, I think it is at risk of oversimplifying what is happening across the tech industry, which is, in fact, a little more complex, writes Kelly Macey, head of technology contract and contingent IT workforce at Reed.

What is Reed seeing on outside IR35 in 2026?

We have seen an increase in outside IR35 roles so far in 2026. But I don't think this signifies an ongoing shift from ‘inside’ the IR35 legislation to ‘outside’ as an ongoing migration.

Instead, it’s the case that multiple factors are converging and have created this apparent ‘outside IR35’ trend.

What is IR35?

IR35 was introduced by HMRC in 2000 to close tax loopholes — ensuring contractors and employees doing the same role paid the same tax.

From a tech recruitment perspective, the IR35 rules exposed the difference between true project-based resource compared to just wanting to hire staff flexibly.

What happened to outside IR35 after the 2021 reforms?

After the April 6th 2021 reforms to IR35 shifted responsibility for determining IR35 status to end-clients (in the public sector from April 6th 2017), many businesses introduced blanket policies to place all contractors inside IR35 — largely as a risk-averse response to concerns around potential HMRC investigations, tax liabilities and legal consequences.

Before then, contractors and recruitment specialists had largely managed the IR35 legislation themselves.

But many organisations simply did not fully understand the reformed legislation, or how to assess the roles, once that responsibility landed with them.

Why did inside IR35 flourish?

In several of Reed's hosted IR35 roundtables on the off-payroll working (OPW) rules, the majority of businesses cited a lack of knowledge, rather than a deliberate strategy, as to why they stopped using outside IR35 contractors. The Intermediaries legislation had not previously been part of many hiring managers' day-to-day responsibilities, and there was a genuine fear of making the wrong decision.

The resulting 'inside IR35' categorisation of temporary IT roles, in other words, flourished not because every role genuinely belonged inside the legislation.

Why do businesses understand IR35 better now?

Thanks to the passage of time, more businesses have gained a greater knowledge as to what constitutes IR35, and so are more confident when it comes to using contractors. Employers in 2026/27 increasingly understand:

1. the IR35 status questions that they need to ask
2. the evidence required for outside IR35
3. the importance of looking at working practices under the IR35 rules, rather than simply relying on a contract or job title

How are businesses assessing IR35 status now?

This increased confidence in 2026/27 is allowing businesses to take a more balanced approach to contractor status testing. Instead of automatically placing every contractor inside IR35, employers are more willing to consider whether an engagement genuinely meets the criteria for operating outside the legislation.

Organisations are now more comfortable with using IR35 status checking tools to help determine if off-payroll working rules apply to a contractor engagement — and have better confidence making their own decisions alongside a tool’s output.

Are IR35 status checking tools enough on their own?

Not entirely. A single IR35 status tool’s questions can appear ambiguous without a proper understanding of what they are trying to establish. For contractors, it’s always worth engaging with specialist (rather than generalist) recruiters, who are likely to be best-placed to advise on all the intricacies of this complex legislation. At the time of writing (Q3 2026), we regularly work with organisations to help them understand the IR35 status assessment process and consider how their roles will operate in practice.

Is it better to contract inside IR35 or outside IR35?

Unsurprisingly perhaps, given the take-home pay differential, we do tend to see a preference for outside IR35 from many limited company contractors.

Such contractors value the ability to decide how they deliver work, manage multiple clients, invest in their business and retain commercial independence — sentiments echoed in contractors’ own accounts of why they’ll never accept an inside IR35 contract.

Do recruiters handle IR35 evaluations in 2026/27?

We cannot speak for all UK recruiters but, at Reed, outside IR35 engagements must pass through our dedicated limited company team.

If we review the role and deem it to be inside IR35, we cannot set up the engagement on an outside IR35 basis. This evaluation reduces the risk of getting the status call wrong, for both sides.

Why are more transformation projects happening now?

We've seen more of an economic recovery in the past six to 12 months, leading to more transformation projects — another reason 'outside IR35' might very well crop up in your next contractor job search.

So, we’ve witnessed more companies greenlighting the large-scale projects from their business roadmaps that have perhaps been on the back burner for the past couple of years.

From an IT recruitment perspective, we're seeing businesses restarting technology and transformation projects, such as data and AI programmes, cyber security projects and enterprise transformations.

Why are more transformation projects calling for outside IR35 skills?

These tech assignments typically require skills that do not already exist within the organisation. The contractor is brought in to deliver a specific piece of work and is given a degree of independence over how that outcome is achieved — and that degree can be enough to tip the balance in ‘outside’s’ favour.

These IT project contractors are being engaged because they have delivered similar programmes elsewhere, and can bring knowledge the organisation does not have internally, rather than providing any general day-to-day support.

What should businesses check before calling a role outside IR35?

Nevertheless, to avoid HMRC ramifications, businesses need to consider the reality of the engagement, including:

• the level of direction or control
• whether the individual contractor can decide how the work is delivered
• whether the contractor will genuinely operate as an independent business

So is outside IR35 really 'back'?

None of this means outside IR35 is becoming the default again. Business-as-usual support, operational roles and contractors effectively filling permanent vacancies will continue to sit inside IR35. The legislation hasn't changed; organisations have simply become more confident at applying it.

Are rising costs and liability rules driving the increase?

Some of the current discussion on the apparent 'outside IR35 comeback' points to the rising cost and complexity of the alternatives — new JSL rules for umbrella companies from April 2026, for example, or the further obligations landing under the Employment Rights Act. Others explain a resurgence in outside IR35 hiring by pointing to boards now opting for the "lowest overall risk, and the lowest overall costs."

What actually determines a role's IR35 status?

To accurately determine IR35 status in 2026/27, businesses need to consider the reality of the engagement, including:

• the level of direction or control
• whether the individual can decide how the work is delivered
• whether they are genuinely operating as an independent business

The previously mentioned developments and pressures may well be part of what's behind more businesses ending up with 'outside IR35' opportunities in their IT departments, but none of them change what actually determines a temporary IT role's status.

What’s the reality of outside IR35 in 2026?

The reality isn't that IR35 is 'back' in the way that some people are discussing it.

Instead, it's a culmination of the increased knowledge around the 2017-21 legislation, businesses trusting specialist recruiters to advise on governance of IR35, and organisations are once again investing in specialist IT and technology programmes that call for more outside IR35 talent.

In brief: outside IR35 in 2026

Is outside IR35 making a comeback in 2026? No, not really. We have seen an increase in outside IR35 roles so far in 2026, but this doesn't signify an ongoing shift from inside the legislation to outside — rather, multiple factors are converging to create this apparent trend.

What's driving the increase in outside IR35 roles? A fair few factors. Businesses have gained a greater knowledge as to what constitutes IR35, so are more confident when using contractors. More are confident using tools too, albeit we’d advise against these in isolation. Some point to rising costs and liability rules for alternatives like umbrella companies too, though those don't change what actually determines a role's status.

What do contractors want on IR35, and are they getting it in 2026/27? Many limited company contractors continue to prefer outside IR35, valuing the ability to decide how they deliver work, manage multiple clients and retain commercial independence. And an economic recovery over the past six to 12 months means more businesses are greenlighting large-scale transformation projects — data and AI programmes, cyber security, enterprise transformation — and that call is conducive to ‘outside IR35’ placements.

Does this mean outside IR35 is becoming the default again? No. Business-as-usual support, operational roles, and contractors effectively filling permanent vacancies will continue to sit inside IR35. The legislation hasn't changed — organisations have simply become more confident at applying it. So an outside IR35 comeback it isn’t; it's more complex and multifaceted than that, all at once.