Can I challenge my client’s IR35 status determination?

Under the Off-Payroll Working rules, responsibility for deciding whether an engagement is inside or outside IR35 sits with the end client, not the contractor — since April 2017 in the public sector and April 2021 for large and medium private-sector clients. The client must issue a Status Determination Statement giving the decision and the reasons, to you and to any agency in the chain, before the contract starts.

The disagreement process

1. Use the client's status disagreement process, which is mandatory under section 61T. Set out, factor by factor, why the determination is wrong.
2. The client must consider your representations and reply within 45 days, either confirming the original SDS with reasons or issuing a revised one.
3. If that fails, you can ask HMRC for a determination of status, and appeal HMRC's decision to the First-tier Tribunal — technically demanding and normally needing a specialist adviser.

You generally cannot sue the client for getting it wrong: its duty runs to HMRC under tax law, not to you privately. That is why many contractors treat a plainly wrong SDS as a reason to leave rather than a dispute to win.

What to argue, and what is at stake

The test is the long-standing hypothetical contract test from employment status case law, not a new one. The factors that matter are mutuality of obligation, control over how, when and where the work is done, and a genuine right of substitution — plus financial risk, use of your own equipment, exclusivity and how far you are integrated into the client's organisation. HMRC's CEST tool is its preferred indicator and binds HMRC if the answers were accurate, but tribunals have criticised its handling of mutuality, so neither side should rely on it alone.

Getting an "inside" determination reversed matters financially: inside IR35 the fee-payer deducts PAYE and employee NICs from the fee and pays employer NICs on top, typically reducing take-home pay by around a quarter to a third. Liability can shift back to the end client where it never issued an SDS, failed to share it, or did not take reasonable care. The Finance Act 2024 offset rules now let HMRC credit corporation tax and dividend tax already paid by your company against any IR35 bill, which removes much of the old double-taxation risk.

One important carve-out: small companies under the Companies Act thresholds are outside the regime entirely, and for those engagements the responsibility — and the risk — returns to your own company.