Contractors’ Questions: What should a robust Status Determination Statement contain?

Contractor’s Question: With third party status assessments, I’m likely to go with the one I like – but it’s constant touting of being the fastest on the market puts me off a bit!

A lot of contractors are singing its praises for often giving an ‘outside IR35’ outcome. Reassuringly the status-testing group does have an umbrella, so I guess that’s proof it’s not just feeding its own business, right? But with the SDS itself, what should it actually say – and not say? If I know both of those aspects, once I get it back, I’ll quickly know in just a glance whether I’ve got my money’s worth and has been done properly!

Expert’s Answer: In the lead up to the April 6th roll out of IR35 reform in the private sector, a lot was made about the speed of IR35 status assessments.

Some technology-based tools offer instant results. Other manual assessments, which are reviewed by an IR35 expert, can take slightly longer. Ultimately, we say, what matters is that all aspects of a contract and the implications they have on IR35 status are examined. 

The living, breathing alternative (or add-on)

From where we stand, it’s difficult for a fully automated tool to achieve this, which is why all status assessments we do are reviewed by one of our living, breathing, human experts!

Granted, this does mean you won’t receive an immediate determination. But in our opinion, and having specialised in the legislation since its inception in 2000, we believe it offers the best possible chance of ensuring accuracy. Also, in the vast majority of cases, contractors will only be waiting a couple of days for a view on their status. 

HMRC requirements for a Status Determination Statement

As to the second part of your question, HMRC states that a compliant SDS must include two things –

• the deemed IR35 status (the decision); and
• the reasons which led to the above decision.

In theory, all factors upon which IR35 status can hinge should be included - from Control and Personal Service to Mutuality of Obligation and anything else (like Financial Risk) that contributes to the eventual determinations. However, be aware -- this isn’t always the case and due to fairly lightweight government guidance in this area of IR35 off-payroll compliance, you might find that the SDS received from your end-client isn’t comprehensive. 

Worried about your SDS? Try this...

If you’re worried about this, a good place to start, to ensure that your status has been closely scrutinised, would be to measure your SDS up against the contract you hold with your client. If the SDS does not refer explicitly to specific aspects of your written agreement, then you may want to ask further questions.

For clarity, I’m not saying this means a decision has been made in a non-compliant manner and without ‘reasonable care’ -- simply that you have every right to query and even challenge a determination if you're worried about its accuracy. After all, the financial implications of working inside or outside IR35 can be significant to contractors from a tax perspective. Good luck!

The expert was Seb Maley, CEO of IR35 specialists and off-payroll rules advisory Qdos.