What is a Status Determination Statement — and why does every outside IR35 contractor need one?
Direct Answer
A Status Determination Statement (SDS) is a written document that your client must provide if they are a medium or large company, stating whether your engagement is inside or outside IR35 and the reasons for that decision. It has been required since April 2021. Without a valid SDS, your outside IR35 status is harder to evidence and defend. Recent cases have shown that where no SDS exists, liability questions become complicated and expensive. Keep your SDS on file for every engagement.
What is an SDS?
A formal written statement from your end-client. Required from all medium and large private sector companies and all public sector bodies since April 2021.
Must state: inside or outside IR35, AND the reasons for that decision. Must be provided to the contractor AND to any agency in the chain.
Small companies (under 2 of: £10.2m turnover, £5.1m balance sheet, 50 employees) are exempt — you determine your own status when working with small clients.
Why is the SDS so important?
It is your primary documentary evidence of IR35 status if HMRC challenges you or your client. It establishes that the client took "reasonable care" in making their determination.
Without it, the question of who bears liability for any unpaid tax becomes much more complicated. Recent cases (including Ducas) have highlighted that where no SDS exists and the end-client had no knowledge of how workers were being paid, liability can fall unpredictably.
What should a valid SDS include?
Your name and the engagement details
The determination: inside IR35 or outside IR35
The reasons for the determination — not just the conclusion
Date of issue
The client's name and signatory
An SDS that just says "outside IR35" with no reasoning is weak — a good SDS explains why, referencing the substitution, control and MOO factors.
What if your client refuses to issue one, or issues an inside IR35 SDS?
If they refuse: you have the right to request one — chase it in writing and keep the correspondence.
If they issue inside IR35: you have the right to dispute it through the client's disagreement process — they must respond within 45 days. If you believe the determination is wrong, get an independent IR35 contract review (typically £100–£300) to document your own position.
An inside IR35 determination from the client does not automatically end the matter — you can challenge it.
How does this relate to Joint and Several Liability?
Under JSL from April 2026, where no SDS exists and HMRC investigates the supply chain, agencies face increased exposure. Having your SDS properly issued and on file protects not just you but your agency. See our Joint and Several Liability guide for more detail.
Your accountant should be asking about your SDS at the start of every new engagement.
At Autobooks, we do.
Full-service contractor accountancy from £89+VAT/month.