IR35Explained:WhatUKStartupsNeedtoKnowBeforeHiringaFreelanceDeveloper

IR35 is UK tax legislation designed to address "disguised employment" — situations where someone works through a limited company but, in practice, functions like a direct employee of the client. Where it applies, it changes how tax and National Insurance are handled on that engagement. Since 2021, medium and large private-sector clients are generally responsible for determining a contractor's IR35 status, rather than the contractor's own limited company.

This is general information, not legal or tax advice — IR35's application depends on the specific facts of an engagement, and a qualified UK accountant or employment lawyer should review your specific situation.

IR35 is UK-specific legislation aimed at UK tax residency and UK limited company structures. Engaging a freelance developer based entirely overseas — for example, in Nepal, invoicing directly and not operating through a UK limited company — sits outside the specific mechanics IR35 was built to address, though your accountant is still the right person to confirm this for your company's exact structure and how you're paying the contractor.

Practically, many UK startups find that engaging an overseas freelance developer directly, with a clear contract and defined scope, is more straightforward from a UK employment-status standpoint than a similar engagement with a UK-based contractor working through their own limited company.

Whatever the classification outcome, a clear written agreement — covering scope of work, deliverables, payment terms, and IP ownership — is the right foundation for any freelance engagement, and it's standard practice before any project discussion begins.