Who Determines Your IR35 Status? Rules for UK Contractors
Dealing with the IR35 rules is critical for independent professionals. Knowing who holds the legal obligation to assess an engagement helps you manage tax risk and ensure compliance.
Who determines your IR35 status and who decides if IR35 applies?
The entity responsible for determining your IR35 status depends on your end client's size for off-payroll purposes. For medium and large organisations, the client decides, whereas for small businesses, the contractor determines their own status.
Under the off-payroll working rules, medium and large private sector clients, alongside public sector bodies, must assess your working arrangements. They are legally required to determine the status and should issue a Status Determination Statement (SDS) detailing their decision.
How do you know if a company is classified as small?
A private sector company is classified as small under IR35 if it meets two or more of the following criteria in an accounting year:
- Annual turnover: Up to £15 million
- Balance sheet total: Up to £7.5 million
- Average number of employees: Up to 50
These thresholds apply to financial years under the Companies Act 2006. It’s also important to consider the 2-year rule for transitioning from small to medium, and the size for off-payroll purposes, to establish if the business is considered medium or large for a specific tax year.
What happens if a client makes an incorrect IR35 determination?
If a client makes an incorrect outside IR35 determination without exercising reasonable care, the financial liability for unpaid tax remains with them.
Contractors can dispute an assessment using the statutory client-led disagreement process.
Take Control of Your Compliance with IR35 Shield
Understanding your rights ensures you can challenge unfair decisions effectively. Protect your income today by utilising the IR35 Shield for Contractors platform to secure an accurate, expert-backed status assessment.
We’re here to support you and your business every step of the way. If you need help with your IR35 processes, feel free to reach out. You can email us at info@ir35shield.co.uk or get in touch with an expert to find out how we can help.
