Information requirements, status disputes and anti-avoidance
IR35 rules require public sector clients and medium and large private sector clients to inform the entity they directly contract with and the freelancer or PSC of their determination with their reasons (a “Status Determination Statement” (SDS)). Determinations must be made on an individual, not a blanket, basis.
All intermediary recipients of the SDS in the labour chain (other than the business client and the individual or PSC) have to pass the SDS and the reasons for it on to the person with whom they contract.
The IR35 rules provide that where an SDS is issued that states that the individual is within IR35 (i.e. to be treated as if an employee), a PSC can challenge it, and the rules provide for a “Status Disagreement Process” for resolving such disputes. Anyone liable to determine status who does not do so, or does so without taking the steps the rules require to ensure that the determination is carried out with reasonable care, or if they do not fulfil any other IR35 obligation, will be made liable for tax and NI, even if they are not the fee payer.
Not only clients, but also the PSCs and individual workers concerned, need to be aware of and work with these information requirements.
See the Guidance Note under "Related Documents" below for further detail.