IR35 in the grid market - what contractors and clients need to know

Britain’s grid market is moving quickly.

Connections reform is progressing, electricity demand is expected to rise as transport, heating and industry electrify, and network companies are preparing for another substantial period of investment. Ofgem has described 2026 as an important year for putting strategic energy planning and connections reform into action.

That creates a very practical challenge: finding enough experienced people to deliver the work.

For grid businesses, developers, consultancies and their supply chains, contractors remain an important part of that equation. Protection engineers, commissioning specialists, project managers, planners and other experienced professionals can give projects access to capability exactly when it is needed.

But whenever contractors are engaged through their own intermediaries, IR35 needs to be understood properly.

It is not simply a contractor's tax issue. It affects how clients structure engagements, how contractors work day to day and, ultimately, how effectively businesses can access a relatively limited pool of specialist grid talent.

First, what does IR35 actually mean?

IR35 is commonly used to describe the UK's off-payroll working rules.

Broadly, the rules consider whether somebody providing services through their own intermediary, usually a personal service company, would have been an employee for tax purposes had they provided those services directly to the client.

For most medium and large private-sector organisations, and public-sector organisations, responsibility for determining employment status sits with the client. For contractors working with a small private-sector client, responsibility generally remains with the contractor's intermediary.

Importantly, IR35 is considered contract by contract.

One contractor could therefore have one engagement that falls inside the off-payroll rules and another that falls outside them.

That distinction matters in the grid market, where the nature of assignments can vary considerably.

The contract is only part of the picture

Imagine a specialist commissioning engineer is brought into a major transmission project for a defined package of work.

On paper, the engagement is structured as an independent service.

Six months later, however, the reality looks rather different. The contractor is being managed in much the same way as permanent employees, their working arrangements have changed and the original description of the engagement no longer accurately reflects what is happening on site.

That gap between paperwork and reality matters.

HMRC makes clear that an engagement's IR35 position depends on both its contractual terms and its actual working practices. Clients are also expected to reconsider the position if those working practices change or a new contract is negotiated.

This is why IR35 cannot sensibly be treated as a form completed on the contractor's first day and forgotten about.

The practical relationship needs to match the assessment.

For clients: blanket decisions can create their own problems

Grid businesses understandably want certainty.

When a project needs 20 contractors quickly, assessing every engagement can feel slower than simply deciding that all contractors will be engaged in the same way.

But HMRC explicitly warns against blanket status assessments that ignore the contractual terms and actual working arrangements of individual engagements. Clients are required to take reasonable care when making their determinations.

Where the client is responsible for the determination, it should provide a Status Determination Statement, or SDS, to the worker and the relevant party in the contractual chain. The SDS needs to state the conclusion and explain the reasons behind it.

For clients, the sensible approach is therefore neither "everyone is inside" nor "everyone is outside".

It is to understand the engagement.

What is the contractor actually being brought in to deliver? How will the relationship operate? Does the written agreement accurately represent that? And has the assessment been made with reasonable care?

Those questions should be answered before the contractor arrives on site, rather than after an issue appears.

For contractors: ask about IR35 early

For contractors, the most useful time to discuss IR35 is before accepting an assignment.

Ask what the status determination is. Ask how the client reached it. Read the reasons in the SDS and compare them with what you have actually been told about the role.

An "outside IR35" label on an advert is not enough by itself.

Equally, an inside-IR35 determination should not automatically be interpreted as the client getting something wrong. Some engagements genuinely fall within the rules.

The important point is that the determination reflects the individual engagement.

If an assignment is inside the off-payroll rules, the client or another party acting as the deemed employer will generally deduct the relevant Income Tax and employee National Insurance before payment, while employer National Insurance and, where applicable, the Apprenticeship Levy are dealt with by the deemed employer.

Understanding that before discussing rates can prevent an unpleasant surprise later.

Why this matters more as grid recruitment accelerates

IR35 would be important in any market. In grid, there is another factor: skills availability.

The Government's Clean Power 2030 Action Plan acknowledges that finding people with the right skills is already a significant challenge. It identifies demand for technical engineers, including electrical, civil, mechanical and design disciplines, alongside project and delivery management expertise. It also notes that many of these occupations are competing with construction, manufacturing and other sectors for talent.

Meanwhile, Ofgem's 2026 work on grid investment and connections reform points towards continued pressure to deliver network infrastructure and get viable projects connected faster.

Against that background, poorly managed contractor engagement can become a recruitment problem as well as a compliance problem.

Experienced contractors tend to understand IR35. They know what questions to ask, and many will compare the structure of one opportunity against another.

Clients that can clearly explain an engagement, its working practices and how its status has been assessed therefore start the recruitment conversation from a stronger position.

Clarity helps everyone.

Expert Thoughts

Adam Standley, Director of Contract Recruitment at Hunter Philips, says getting IR35 right is about making sure the determination reflects how the contractor will actually work.

"One of the biggest mistakes with IR35 is treating it as a box-ticking exercise. In the grid market, contractors are often brought in for specific requirements, whether that's commissioning, protection or project delivery, so the assessment needs to reflect the individual engagement rather than applying the same decision across every contractor. Experienced contractors understand IR35 and will ask how a determination was reached and whether the working arrangements match it. That matters in a market where specialist skills are already difficult to find. Not every contract needs to sit outside IR35. What matters is having a clear, properly considered position that you can explain. Getting that right gives contractors confidence and helps clients access the specialist talent they need without creating unnecessary uncertainty."

The recruitment supply chain matters too

Grid contracting often involves several parties: the end client, recruitment partner, contractor and contractor's intermediary.

HMRC's guidance recognises those chains explicitly. Where an SDS needs to travel through a labour supply chain, each relevant party has responsibilities around passing that determination onwards.

That makes communication particularly important.

A specialist recruitment partner should understand how the client intends the engagement to operate, ensure the contractor receives the relevant information and raise inconsistencies before they become bigger problems.

It is not about trying to manufacture a particular IR35 outcome.

It is about making sure everyone understands the arrangement they are entering into.

Good IR35 practice is really good communication

For contractors, that means understanding the status of an engagement before committing to it and checking that the working reality matches what was agreed.

For clients, it means making individual, reasoned determinations, documenting them properly and reviewing them when circumstances change.

And for recruitment partners, it means making sure those conversations happen early.

The UK grid has enough difficult problems to solve already. Finding the engineers and project specialists needed to deliver it should not be made harder by avoidable uncertainty around how they are engaged.

At Hunter Philips, we work across the renewable energy and grid markets, connecting businesses with specialist permanent and contract talent. If you're building a project team, or considering your next grid contract, speak to our team about what we're seeing across the market.

 

This article provides general market information and should not be treated as tax or legal advice. Organisations and contractors should seek appropriate professional advice on their individual circumstances.