How to challenge an IR35 Status Determination Statement

In short: you can challenge an SDS at any time before the final payment for the engagement. Give reasons tied to the employment status tests. The client must respond within 45 days — either confirming its view with reasons or issuing a new SDS. If it doesn't respond in time, it becomes liable for the tax until it does.

What an SDS must contain

If your client is medium or large, or in the public sector, it must give you a Status Determination Statement saying whether the off-payroll rules apply and why. It must take reasonable care in reaching that conclusion — for example, by considering the actual contract and working arrangements rather than applying a blanket "everyone is inside" policy. An SDS without reasons isn't valid.

Your right to disagree

Section 61T of the Income Tax (Earnings and Pensions) Act 2003 lets you (the worker), or the deemed employer, tell the client that the SDS conclusion is wrong. HMRC's guidance says a disagreement can be made in writing or verbally, but it must give reasons linked to employment status. In practice, always put it in writing.

The client must then, within 45 days of receiving your representations, either:

• confirm its conclusion and give you its reasons, or
• withdraw the old SDS and issue a new one with a different conclusion and the date it applies from.

If the client misses the deadline, it becomes responsible for the PAYE and National Insurance itself until it responds. While the disagreement is considered, your tax treatment stays as it is.

How to write a strong challenge

1. Get the reasons. If the SDS gives only a conclusion, ask for the reasons first.
2. Answer each reason with evidence. Quote clause numbers and describe how the work actually happens. Generic statements ("I'm a business") carry little weight.
3. Focus on the factors that matter most: a genuine right of substitution, the absence of a framework of control over how, when and where you work, real financial risk, and not being integrated like staff.
4. Address mutuality realistically. After the Supreme Court's PGMOL decision, arguing "no mutuality of obligation" on its own rarely succeeds.
5. Propose fixes. If the paperwork is the problem, suggest amended clauses the client could accept — and then make sure working practices change too.
6. Keep a record of what you sent and when, so the 45 days are clear.

If the client still says inside

The client-led process is the formal route; there is no right of appeal to a tribunal against an SDS itself. Your options are then to negotiate a different engagement structure, accept the determination (perhaps with a higher rate), or decline the role. If you think the client has not taken reasonable care, take specialist advice.

Sources: s61T ITEPA 2003; HMRC, "Help to comply with the reformed off-payroll working rules" (client-led disagreement process). General information, not tax advice.