IR35 advisers split on Status Determination Statements being required from April 6th 2023

Advisers to contractors are divided over the “highly likely” prospect that HMRC will require a Status Determination Statement of limited company workers from April 6th 2023.

Given IR35 non-compliance this year is forecast at £430m, Jenner & Co says officials won’t just “do nothing” to stop mass flouting of the original legislation, which reapplies from 06.04.23.

The tax advisory’s founder even believes that the very reason repeal of the 2017 and 2021 off-payroll rules is seven months off, is to give HMRC time to consider “other provisions”.

“HMRC may put something into the 2000 legislation to force PSCs to consider [and formally record] whether IR35 applies to a contract,” adds Graham Jenner, a chartered accountant.

“The Status Determination Statement is now familiar to contractors. And while original IR35 puts the obligation on the PSC to decide status, it makes no obligation on a process. Yet.”


A client-side IR35 status adviser agrees that HMRC requiring from the contractor the same document that it has required from engagers – the SDS – seems a “sensible” next step.

“HMRC has seen where OPW worked, so it’s highly likely it will want to tweak the old IR35…[like] requiring a SDS from the contractor,” says the adviser, Rebecca Seeley Harris.

“While such a move would need new legislation, it would make sense that HMRC will want the [contractor’s] self-declared status to be formalised, and SDS would seem to fit the bill.”


Boss at ReLegal Consulting, Seeley Harris observes that an SDS must have a conclusion, reasoning, and ‘reasonable care’ must have been taken, according to in-force Chapter 10 ITEPA.

However one of the advisers who believes SDS has had its day, Chris James, points out that Chapter 10 is heading for the scrap heap.

“The SDS requirements are in Chapter 10 of ITEPA 2003, and those rules are being repealed,” begins Mr James, head of limited company solutions at Workwell.

“Assuming that all goes ahead as planned, requiring contractors to do something like an SDS would need adding to Chapter 8, and doing that in time for a Finance Bill seems unrealistic.”

'All on the contractor again'

The accountancy boss has doubts over SDS outliving the repeal on a practical level too, as it served to give “notification” of IR35 status to the supply chain -- a notification expiring on April 6th.

Mr James said: “There are other, related risks for the supply chain but in as far as IR35 returning and the off-payroll rules going, it’s all on the contractor again. 

“There’s no decision to publish or transmit [IR35 status] to other parties. So the traditional SDS seems unnecessary after the April 6th 2023 change.”  

'Reasonable care test already included'

Declining to be named, another adviser claimed contractors could face a ‘reasonable care’ test post-April, but warned shifting the duty from clients would be tricky for HMRC to enforce.

However, formerly seconded by HM Treasury to help with IR35, Kate Cottrell says a reasonable care test, like the idea of an SDS requirement post-April, just isn't going to happen.

And both for quite different reasons. “IR35 version one has always included the need to take ‘reasonable care’ when deciding IR35 status,” she began last night.

“This is the bit that protects from penalties if HMRC finds an inside IR35 position and is why evidence of IR35 contract reviews from a specialist firm that do a proper job by reviewing working practices and contracts is  a priceless piece of evidence when under IR35 investigation. 

“HMRC always ask at the start of a compliance check if IR35 has been considered and also for the results of any assistance given.  So the ‘reasonable care’ test does not need to shift as it has always been there.”

'No IR35 changes needed'

“As for an SDS requirement on contractors,” continued the co-founder of status specialists Bauer & Cottrell, “a comprehensive IR35 review is far more valuable than these statements.

“Certainly more valuable than the SDSs churned out by tools. Overall, I doubt very much if the repeal… [necessitates] any changes being made to the IR35 rules, as none are needed.”

A former inspector, Cottrell does foresee some changes – but is it her former employer who will have to make them.

'Complete re-write of CEST'

“It is likely CEST will be redundant, or at least subject to a complete re-write,” she predicts. “Currently, CEST output gets knocked into a tin hat by any IR35 review worth its salt.”

But accountant Mr Jenner maintains that at the drop of a hat, things could all change for PSCs – including having foisted on them a need for contractors to complete a SDS.

“A relatively simple paragraph requiring the PSC to prepare a SDS for each contract, and to apply IR35 to any contracts where the PSC’s SDS is inside IR35 might be comparatively easy legislation to introduce,” he says.

'Frightening effect'

“That could be done at the same time as the repeal of the reforms. Unfortunately…[any SDS requirement] would have a similar, frightening effect as it did on a proportion of clients.

“So some PSCs will be wary of concluding that a contract is outside IR35 if they have to document their reasoning. However, accountants and others with appropriate knowledge could probably carry out a determination quite quickly”.

At Workwell, Mr James said HMRC and HM Treasury were “no doubt” still considering what “extra guidance or compliance activity” should apply from April 6th 2023.

'Keep a file of evidence'

“But I’d expect this to be outside Chapter 8 for now. [Any incoming HMRC guidance] could include recommending that contractors keep a file of evidence on their status each period.”

He continued: “Yet of course that, alongside having contracts and working practices reviewed regularly, has been best-practice advice for contractors for many years.”

At ReLegal Consulting, the concern is that a HMRC framework in force for many years and now undergoing a resurgence, could be the inspiration for a new approach to the old IR35.

“Presently with IR35, there’s no transfer of debt provision [which is contained in the Managed Service Companies legislation of 2007],” the firm says. “But if bolted on [to IR35], expect nervous clients.”

'HMRC might try a lot harder with IR35 this time around'

Online yesterday, a contractor suggested that HMRC’s answer to addressing this year’s projected £430million in IR35 non-compliance could be HMRC itslf, not extra ‘bells and whistles’ on legislation from 20-plus years ago.

“The concern is that HMRC might try a lot harder this time,” said the contractor, a Linux specialist, referring to HMRC’s mixed record on enforcement.

“Whether that is plausible, and whether their success rate will be any higher than in the first 17 years, [we'll have to wait and see].”

'Too much of a burden'

Author of a forthcoming report on CEST, Mr Jenner reflected: “The Office of Tax Simplification – which a bit like IR35 reform was dispatched of at Mini-Budget -- did warn the government that making the end-client responsible for determining whether IR35 applied would be too much of a burden on end-clients.

“Yet that is what the government went ahead and did anyway. Whether repeal of the reforms is to be accompanied by a requirement for PSCs to do their own SDS, ultimately, remains to be seen. But if it does, the government will need to be careful that it doesn’t become too much of a burden on PSCs.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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