The Status Determination Statement (SDS) is a document that the end client must issue under the off-payroll working rules for medium and large private sector businesses and all public sector organisations. It sets out the client's determination of whether an engagement is inside or outside IR35 and the reasons behind that decision.
What must the SDS contain?
The SDS must state whether the engagement is inside or outside IR35 and provide the reasons for that conclusion. A vague statement such as "we have determined this role is inside IR35" without supporting reasoning does not meet the legal requirement. The client must explain which factors of the working relationship they considered and how those factors led to their determination.
When must it be issued?
The SDS must be issued before the first payment under the contract. In practice, reputable clients issue the SDS during the engagement process, before the contractor formally accepts the role. The SDS must be provided to both the contractor and the next party in the supply chain (typically the recruitment agency).
Your right to challenge
If you disagree with an inside IR35 determination, you have the statutory right to challenge it. You must make your representations to the client, who then has 45 days to respond with either a revised determination or confirmation of the original decision with detailed reasons. The challenge process must be taken seriously by the client. If they fail to respond within 45 days or fail to take reasonable care in their determination, the liability for any incorrect tax treatment can shift to the client.
What to look for in an SDS
Review the reasoning carefully. Does it accurately reflect your actual working practices? Has the client considered substitution, control, and mutuality of obligation individually? Has the determination been made on a blanket basis or through a genuine individual assessment? If the reasoning does not match reality, document the discrepancies and prepare a clear, evidence-based challenge.