IR35 and Day-Rate Contracting for MEP Commercial Staff

IR35 remains one of the most misunderstood parts of contract hiring in UK construction. For MEP contractors running data centre programmes, the determination you make on each contract role affects cost, compliance and the size of the candidate pool available to you.

This is a practical overview for hiring managers and contractors. It is general information, not tax or legal advice: always take professional advice on individual engagements.

Inside vs outside IR35 in plain terms

An engagement is outside IR35 when the contractor is genuinely in business on their own account: they control how the work is done, can provide a substitute and are not integrated into your organisation like an employee. It is inside IR35 when the working relationship looks like employment, and tax and National Insurance must then be deducted at source.

Since April 2021, medium and large private sector engagers are responsible for making the determination and providing a Status Determination Statement.

What it means for day rates

Inside IR35 roles effectively cost the contractor more in take-home terms, so the day rate needs to rise to attract the same calibre. On current data centre programmes we typically see inside IR35 contract QS rates quoted £50 to £100 per day higher than equivalent outside IR35 engagements.

Contractors who refuse to make proper determinations, or who blanket-assess every role as inside, consistently shrink their available talent pool. Senior commercial staff with strong NEC experience usually have options and will choose engagements that are administered properly.

What good looks like

• A written Status Determination Statement for each contract role
• Determinations made on the actual working practices, not the job title
• Clear scope of services for outside IR35 engagements
• Consistent processes across the programme, reviewed as the project evolves

For contractors

If you are a contract QS or Commercial Manager, keep evidence of how each engagement operated: your contract, any substitution clauses and how the work was actually run day to day. If a determination looks wrong, you have the right to challenge it through the engager's disagreement process.

Permanent or contract?

Our contract versus permanent guide breaks down the numbers across the UK and Ireland. And if you would rather talk it through, call us: we advise on both sides of this every day.