HMRC rules out Status Determination Statements being required of contractors from April 6th 2023

HM Revenue & Customs has told ContractorUK that limited company contractors will not need to complete nor ever produce Status Determination Statements after April 6th 2023.

The statements are part of the Chapter 10 ITEPA off-payroll rules, which the government said at Mini-Budget 2022 it would repeal and replace with IR35 (Chapter 8) from 06.04.23

But advisers feared that in a bid to strengthen that ‘old’ legislation of 2000, HMRC would transpose the SDS requirement which public and private sector clients have been subjected to since April 6th 2017 and April 6th 2021 respectively, to PSCs.

The thinking being that rather than just being able to claim they are outside IR35, contractors would have to formally record their determination and produce it should they be probed by HMRC.

'Likely'

Given HMRC estimates compliance with the old but incoming Intermediaries legislation to be as low as 10%, some advisers said SDSs would “likely” be a requirement for PSCs post-April.

But an HMRC spokesperson told ContractorUK: “Contractors will not be required to produce a Status Determination Statement to comply with the off-payroll working rules from April next year.”

So, there will be no statutory requirement for PSCs to produce an SDS from April 6th 2023, at which point the current requirement for clients to produce the statements will end too.

'Intermediaries will have to keep records'

Yet as contractors and their PSCs will need to file tax returns based on the IR35 status which they determine, the details they keep will likely be identical to those found in current SDSs.

Or, as the HMRC spokesperson put it: “Contractors and their intermediaries will have to keep any records or documents that will be used to support their tax affairs.” 

The Revenue has said it will support taxpayers too, with an education programme and full guidance on complying with IR35, intended well before the April 6th commencement date.

'Reduce the admin burden'

Reading the Chapter 10/2021 off-payroll rule guidance, albeit only as far as it relates to ‘small companies’ is one way the department believes PSCs can get up to speed in the meantime.

A government spokesperson said: “We have repealed the reforms to the off-payroll working rules to simplify the tax system and reduce the administration burden on businesses which engage contractors, which in turn makes it easier for them to be more productive and grow.

“We appreciate some contractors will be determining their employment status for the first time while others will not have done so for a while. We will therefore support contractors to understand what they need to do from April 2023 and help them to get their tax right.”