What Is a Status Determination Statement?

A status determination statement (SDS) is how a client communicates its decision on whether the off-payroll working rules, known as IR35, apply to a worker who provides their services through their own intermediary. HMRC says an SDS must give the client's conclusion and the reasons for reaching it, and must be passed to the worker and to the person or organisation the client contracts with, which is often the recruitment agency (gov.uk: Off-payroll working for clients).

The duty sits with the client, not the agency. Public sector clients and medium and large-sized private and voluntary sector clients must decide the status of every such worker, even one supplied through an agency, and must take reasonable care in doing so. A small private or voluntary sector client does not issue an SDS; the worker's own intermediary makes the decision instead.

Timing matters because of who carries the tax. Until the client tells the worker and the party it contracts with of its determination and the reasons for it, the client itself is responsible for deducting Income Tax and employee National Insurance and for paying employer National Insurance.

A worker, or the deemed employer, can disagree with the determination. The client then has 45 days to respond, either confirming its decision or telling them it has changed; if it fails to respond in time, the worker's Income Tax and National Insurance become the client's responsibility (HMRC manual ESM10015).

For an agency, the practical point is to have the client's SDS on file for every placement where the worker uses their own company before the first payment is made. The IR35 status determination statement guide covers where the agency sits in the deemed-employer chain and what happens when an SDS is missing or disputed.