What can I do if I disagree with my IR35 status determination?

Full answer

Under the off-payroll working rules (commonly called IR35 for the private sector reforms), medium and large private sector clients -- and all public sector clients -- are responsible for determining whether a contractor engagement falls inside or outside IR35, issuing a Status Determination Statement (SDS) to the contractor and the fee-payer. If a contractor disagrees with the determination, there is a specific statutory process to challenge it. **The client-led disagreement process** A contractor who disagrees with an SDS must raise their disagreement directly with the client (not HMRC directly, at least initially), setting out the reasons why they believe the determination is wrong. The client is legally obliged to consider the representations made and respond within 45 days of receiving the disagreement, either upholding the original determination (with reasons) or issuing a new SDS with a different conclusion. **What happens while the dispute is ongoing** Crucially, the original SDS remains in effect and continues to be applied (meaning tax and NI continue to be deducted, or not deducted, according to the original determination) throughout the 45-day period while the client considers the disagreement -- the contractor cannot unilaterally switch how they are paid or taxed simply by raising a disagreement. **If the client fails to respond within 45 days** If the client does not respond with a decision within the 45-day window, they lose their legal status as the 'fee-payer' liable for the tax under the off-payroll rules for that engagement, and this liability can shift up the labour supply chain (potentially to an agency or umbrella company instead) -- creating a strong incentive for clients to engage properly and promptly with genuine disagreements rather than ignore them. **Worked example** A contractor providing IT consultancy through their own limited company is issued an SDS by the end client stating the engagement is 'inside IR35' (deemed employment for tax purposes). The contractor believes this is wrong because they have genuine substitution rights, control over how the work is done, and take on financial risk -- all factors pointing towards genuine self-employment. They submit a written disagreement to the client, citing these specific factors with supporting evidence (such as the actual contract terms and working practices). The client has 45 days to review and respond. If the client changes the determination to 'outside IR35' after reviewing the evidence, the contractor can then be paid gross through their limited company (subject to their own corporation tax and dividend tax arrangements) rather than having PAYE tax and NI deducted at source. **Beyond the client process** If a contractor remains dissatisfied even after the client's 45-day review, there is no further statutory appeal route built into the off-payroll rules specifically -- the contractor's recourse at that point is more limited, though disputes about the underlying employment status itself can, in some circumstances, also be relevant to separate employment tribunal or HMRC enquiry processes. Keeping detailed contemporaneous evidence of actual working practices (not just the written contract) is the most practical way to support a disagreement. **Why this matters** An incorrect 'inside IR35' determination can mean a contractor pays substantially more in effective tax (PAYE-style deductions) than a genuinely self-employed arrangement would require, so understanding and properly using the disagreement process is an important safeguard, even though the process places the decision-making power firmly with the client rather than an independent body.

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