Status Determination Statement (SDS): A Contractor’s Guide
What is a Status Determination Statement?
A Status Determination Statement (SDS) is a formal document issued by the end client that determines whether your contract is inside or outside IR35. It also explains the reasons for the decision. For contractors working through umbrella companies, the SDS confirms how your earnings are taxed and ensures transparency across the supply chain.
Learn more about IR35 and umbrella companies
Who Issues the SDS?
The end client is responsible for issuing the SDS—not your umbrella company or recruitment agency. Once issued, it must be shared with:
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The contractor
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Any intermediary, such as an umbrella company
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Relevant recruitment agencies or fee-payers
If the SDS is not correctly issued, tax responsibility may transfer to the next party in the chain.
How umbrella companies handle tax and compliance
What Should an SDS Include?
A valid SDS must:
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Clearly state whether the engagement is inside or outside IR35
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Provide the reasons for the decision, referencing factors such as control, substitution rights, mutuality of obligation, and financial risk
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Demonstrate that the client has exercised reasonable care in making the determination
Without these details, the SDS may be invalid, potentially leaving you exposed to tax liabilities.
When Should You Receive an SDS?
You should receive the SDS before starting the assignment or receiving payment. IR35 assessments are conducted on a per-contract basis, so a new SDS is required for each engagement. If your working arrangements change during the contract, the client should issue a new SDS to reflect the updated circumstances.
Understanding your umbrella contract
Can You Challenge an SDS?
If you believe the SDS is incorrect, you can challenge it:
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Submit your representations to the client, usually within 45 days
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The client must respond in writing, either confirming the original determination or issuing a revised SDS
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If the client does not respond, they may assume responsibility as the fee-payer
Handle challenges professionally to maintain a good working relationship with the client.
Why SDS Matters for Umbrella Workers
Even for umbrella workers, a valid SDS is crucial. It ensures:
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Your IR35 status is correctly assessed
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PAYE deductions are applied correctly
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You are protected from unexpected tax liabilities caused by negligent assessments
A clear SDS gives both contractors and umbrella companies certainty about tax obligations. If you are still deciding which umbrella company to use, check out our Top 10 Umbrella Companies page for trusted options.
Summary
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SDS is a formal document determining IR35 status and reasons for the decision
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Issued by the end client and shared across the supply chain
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Should be received before work starts and updated if circumstances change
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You can challenge an SDS if it is incorrect
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Umbrella workers benefit from SDS clarity to ensure correct PAYE deductions
Understanding your Status Determination Statement is essential for contractors. It protects you from tax risk and helps you manage your assignments confidently.
