What is a Status Determination Statement (SDS)?
If you’re a UK contractor working through a Limited Company or an intermediary, understanding your Status Determination Statement (SDS) is essential. An SDS determines your IR35 status, clarifying whether your assignment is considered inside or outside IR35, and ensures you pay the correct Income Tax and National Insurance Contributions.
In this blog, we explain what an SDS is, why it matters for contractors, and how SG Umbrella helps you stay fully HMRC-compliant while protecting your take-home pay. Learn how to read, question, and act on your SDS, and ensure transparency and compliance throughout your contracting journey.
Understanding IR35 and SDS
The Status Determination Statement is part of the off-payroll working rules, often referred to as IR35. These rules are designed to ensure that individuals working like employees, but through their own Limited Company or other intermediary, must broadly pay the same Income Tax and National Insurance Contributions (NICs) as employees working via PAYE.
IR35 is a form of tax legislation designed to identify those who are claiming to be working independently, but are in fact effectively working as an employee, but still accessing all the tax benefits that are only available to those operating through their Limited Company as a truly independent worker.
An SDS is a formal document which the end client must provide when engaging with contractors who operate through intermediaries, such as personal service companies (PSCs).
The SDS is used to:
- Declare the worker’s IR35 status of their assignment (i.e. whether they’re ‘inside’ or ‘outside’ of IR35)
- Provide evidence to support that status determination
- Share the final decision with the worker and other parties within the supply chain
Inside vs. outside IR35 – what exactly does it mean?
Inside IR35 – You’re considered to be working as an employee. So, tax and National Insurance will be deducted at source (exactly as it would be for a permanent employee).
Outside IR35 – You’re considered to be genuinely self-employed and are responsible for handling and paying your own taxes.
As an SG Umbrella employee, we ensure all your taxes and contributions are handled via PAYE, guaranteeing full compliance with HMRC’s strict regulations.
Why SDS matters to you
Whilst the SDS is issued to your Limited Company or agency, it’s important to understand the direct implications this can have on you as the contractor or employee. Here’s why it matters:
Transparency: SDS provides clarity on your employment status
Compliance: It ensures you’re working under the correct tax structure
Dispute rights: If you don’t agree with the SDS decision, you have the right to challenge it and will receive a response within 45 days
Your next steps when you receive an SDS
- Read it carefully – understand whether your role is inside or outside of IR35.
- Ask questions – If anything is unclear, now is the time to ask questions. Your agency or end client should be transparent with their decision.
- Seek advice – Ask the SG Umbrella team about anything to do with your SDS that doesn’t make 100% sense. If you’d prefer to question your end client or agency’s decision, the team here at SG can refer you to our Insurance partners, Kingsbridge for a written IR35 contract review, from just £50+VAT. Get in touch with them today to find out more.
SG Umbrella’s commitment to compliance
We know better than anyone how complex the off-payroll rules can be, that’s why we only work with compliant partners that are as committed to helping our employees understand every step of the supply chain as we are. Remember that if you ever receive an SDS and aren’t sure what it means, or how it affects your take home pay, our team is always here to support you.
To help make sense of your SDS, understand further how compliance works and keep contracting stress-free, get in touch with us today.
Note: All the information and advice in this blog post was correct at the time of writing.
