IR35 SDS Rights & End Client Duties Explained
A clear, narrative-driven breakdown of IR35 compliance, your SDS rights as a contractor, and what obligations your end client must meet to ensure fair and lawful engagements in the UK.
Who Really Decides? Understanding IR35 and the SDS
The implementation of IR35 rules in the private sector has shifted the burden of compliance in seismic ways. Where once contractors decided their tax status, now end clients hold the keys. Enter the Status Determination Statement (SDS): a document at the very heart of IR35 compliance, reshaping power, risk, and rights for everyone in the contracting chain.
"You do not have to accept an unfair SDS. Know your rights – and how to challenge them."
What is a Status Determination Statement (SDS)?
An SDS is a written determination by the end client, stating whether your engagement is inside or outside IR35. Crucially, it must be accompanied by clear reasons—even if the result stings.
Your SDS must:
- Explicitly state IR35 status (inside or outside).
- Provide detailed reasoning behind the determination.
- Be handed to both your PSC (personal service company) and any fee-payer in the supply chain.
If your client can't offer an SDS, alarm bells should ring. Without it, they're failing in their legal duty.
Your Rights as a Contractor
Let’s be direct: You’re not powerless. The legislation isn't just a stick for HMRC—it’s a shield for contractors, too. Here’s where your rights shine:
- The right to a reasoned SDS: No generic statements. If your client simply ticks a box, push back.
- The right to challenge: Disagree with the SDS? Initiate a challenge, and your client must respond within 45 days.
- The right to fair consideration: Your end client must genuinely review any facts, evidence, or clarifications you bring.
You have a voice. Use it—silence is compliance.
The Obligations of the End Client
With great power comes legal responsibility. Under IR35, end clients must:
- Make an informed, thorough status determination for every engagement.
- Issue an SDS, with clear explanations, to the contractor (and fee-payer, if different).
- Establish and communicate a status disagreement process.
- Respond to any SDS disputes within 45 days, providing clear reasons if the original SDS stands or issuing a new one if it changes.
Failure to comply means:
- The client becomes liable for tax and National Insurance, not you or your PSC.
| Obligation | Who Must Meet It | What Happens if Ignored? |
|---|---|---|
| Create a reasoned SDS | End Client | They assume tax liability |
| Supply SDS to PSC & fee-payer | End Client | Status is invalid, client holds risk |
| Operate a disagreement process | End Client | Financial and reputational damage |
The Contractor’s Challenge: What To Do If You Disagree
- Ask for full details. If the SDS is vague, request the rationale and evidence behind the decision.
- Document your working practices. Show the facts—control, substitution, mutuality of obligation.
- Submit a formal challenge. Detail where the SDS misrepresents your contract or practice.
- Push for a written response. The client must reply in 45 days.
This is not a paper exercise. The outcome determines your tax status—and your livelihood.
Signs of Non-Compliance: Red Flags and Action Steps
If you never see an SDS or get silence in response to your challenge, your client is out of line—legally and ethically.
- No SDS issued before engagement starts
- Copied-and-pasted reasoning across contractors
- Challenge process is unclear, ignored, or absent
Act:
- Remind clients their liability is on the line
- Seek advice from a trusted accountant or IR35 expert
The Human Impact: Stories from the Field
"My client said 'everyone is inside IR35 now' and sent identical SDSs to hundreds of contractors. I persisted, provided specific evidence, and—but only after several emails—won a revised (and accurate) SDS. The law was on my side, not just my agency's convenience."
One size doesn’t fit all—don’t let anyone suggest otherwise.
IR35, SDS, and the Future of Contracting
Contractors are critical to the UK economy’s flexibility and innovation. The SDS, when used responsibly, clarifies status fairly for all. It’s when process turns lazy—or outright unlawful—that the trouble starts.
Remember:
- You have statutory rights regarding your work status.
- End clients face financial and legal consequences for non-compliance.
- Knowledge, documentation, and confidence are your best defence.
If you’re ever unsure, seek guidance from independent experts. Don’t allow unfair practices to define your career.
Take control—know your IR35 rights, stand your ground, and help build a culture of fair contracting in the UK.
