As a contractor, before you begin an assignment, you will be issued a Status Determination Statement (SDS), which provides important information about the IR35 status assessment. Continue reading to discover everything you need to know about what an SDS is.

What is a Status Determination Statement?

A Status Determination Statement (SDS) is a document produced by the end client that states the outcome of a temporary worker’s IR35 status assessment. The SDS will determine whether the worker is inside or outside IR35 and explain why the end client has reached that outcome.

What is included in a Status Determination Statement?

To produce a valid SDS, the government website states that end clients must “take reasonable care” when they “make a determination about the employment status of a worker”. This means end clients must conduct a proper assessment for each individual and cannot make blanket decisions for their temporary workers.

Once an end client has conducted a status determination assessment, they will issue an SDS, which sets out their decision. An SDS will include:

  • The status decision (employed or self-employed for tax purposes)
  • The reasons for how the decision was reached based on employment status indicators

If the SDS does not meet the criteria above and the end client has not taken reasonable care when making its decision, it will not be valid.

If the end-client does not take reasonable care when they make a determination or provide reasons for the determination, they will assume the position of the ‘fee-payer’. They will assume the position of fee-payer even if a recruitment agency or another body (e.g., an umbrella company) has this role within the supply chain. As a result, the responsibility for the deduction of tax and national insurance, as well as the payment of the apprenticeship levy (if applicable) and paying these to HMRC, now lies with the client.

Who is responsible for issuing a Status Determination Statement?

Public and private sector end clients are responsible for conducting the worker’s status determination assessment and issuing the SDS. The only exception to the rules is if the end client engaging you is considered a small private-sector client and meets two of the following criteria:

  • Annual turnover of less than £10.2 million
  • A balance sheet total (assets) or more than £5.1 million
  • An average of more than 50 employees

Public sector and private sector end clients must issue the SDS to the contractor and also the recruitment agency. The SDS must be passed to the next party in the supply chain before any payment is made to the worker. Otherwise, the end client (if the SDS is not passed to the recruitment agency) or the recruitment agency (if the SDS is not passed to the umbrella company) will be the deemed employer and responsible for operating PAYE.

When should you receive a Status Determination Statement?

Your end client will issue an SDS prior to your engagement and first payment. With each new contract, you will be issued a new SDS as an IR35 status determination is applied on a contract-by-contract basis. Your status may differ depending on the contract agreed with your end client. Therefore, it is possible to take on inside and outside IR35 contracts. If the terms of your engagement change mid-way through a contract, your client should reconsider the status of your engagement under the new terms and issue a new SDS.

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If you are new to contracting or are looking to switch umbrella companies, our Sales Consultants can explain everything you need to know to ensure you understand how an umbrella company works – including what an SDS means for contractors.

To learn more about our umbrella service or request a free, tailored take-home pay illustration, please call 01707 87622. You can also schedule a call for a time that suits you, and a member of the team will contact you.