Status Determination Statement (SDS) – Guide for Contractors (IR35)
If you’re contracting through a limited company or PSC, you’ll sometimes hear “SDS” in the same breath as IR35. This page explains what an SDS is, why it matters, and what you can do if you disagree with it — in plain English.
What is an SDS?
An SDS (Status Determination Statement) is a written decision about whether an engagement should be treated like employment for tax purposes under the off-payroll rules (often called IR35).
It’s basically the client saying:
- “We think this role is inside IR35 (like employment),” or
- “We think this role is outside IR35 (genuine self-employment),”
…and why they think that.
Who issues the SDS?
In normal cases, the end client (the organisation you work for) is responsible for issuing the SDS and giving the reasons.
As a contractor, you can:
- review it,
- ask for clarification,
- and challenge it if you think it’s wrong.
But you typically can’t “issue your own SDS” that replaces the client’s SDS.
Why the SDS matters to you
Because the SDS often drives:
- whether PAYE tax/NIC is deducted,
- what agencies/fee-payers do in payroll,
- and what paperwork is required for onboarding.
If the SDS says inside IR35, your take-home pay can change (depending on how you’re paid). If it says outside, you’ll still want the reasons documented properly.
"Inside vs outside" – what the decision is actually based on
SDS decisions usually come down to a few big ideas:
1) Control
Who decides how the work is done, when, and where?
2) Substitution
Can you genuinely send a substitute, and would the client accept them?
3) Working like a business
Do you look like you’re running your own business (deliverables, financial risk, providing equipment, ability to work for others, not being integrated like staff)?
Important: a contract can say “outside”, but if day-to-day working practices look like employment, that can pull the conclusion back inside. Same the other way around.
If you disagree with an SDS, what can you do?
You can usually send the client a representation (a challenge) explaining why you disagree and what evidence supports your view.
What should you include?
- The SDS decision and the parts you disagree with
- Specific contract clauses (quote them)
- Concrete working-practices facts (not just opinions)
- Anything showing independence (deliverables, substitution, multiple clients, etc.)
What happens next?
The client should respond in writing — either:
- confirming the original decision (with reasons), or
- issuing a new SDS.
Many organisations operate a formal process with a stated response timeline (often referenced as 45 days in guidance), so it’s worth keeping everything in writing.
How to prepare your evidence (contractor checklist)
If you want to make a strong case, collect:
- Contract + Statement of Work (SoW)
- Role description and deliverables
- Written confirmation of working practices (from the hiring manager if possible)
- Examples of you controlling delivery (milestones, acceptance criteria)
- Evidence of substitution reality (if relevant)
- Proof of business operation (insurance, other clients, website, tooling)
How Docoply can help (without pretending to be legal advice)
1. IR35 Contract Check (contractor-friendly)
Upload your contract and see a structured analysis of the main factors.2. SDS generator (mostly for end clients / agencies)
End clients can generate an SDS preview and download a pack for records.(Preview is free; payment applies to downloads.)
Frequently Asked Questions
Can I refuse an inside IR35 SDS?
If my contract says "outside", why did I get an inside SDS?
Should I challenge the SDS or walk away?
Do agencies issue SDS?
It varies by supply chain. Often the end client is responsible for the determination, but different chains can be structured differently. Ask who is accountable and who will respond to representations.
Does using an online tool guarantee an outside result?
No. Tools can help you structure the factors and evidence, but the client’s process and working practices still matter.
Disclaimer
Docoply provides automated analysis to help you understand contract wording and common status factors. It is not legal or tax advice. If a decision is high-stakes, consider professional advice.
Want a quick read on your contract?
Related resources
Contractors usually start with the IR35 check. End clients use the SDS generator.