How to appeal an SDS decision on your IR35 status
In Kingsbridge’s recent contractor survey, an enormous 90% of contractors that had appealed an IR35 status, told us that they did not find the IR35 appeals process easy and that they did not receive a fair hearing. 13% of contractors had appealed a Status Determination Statement (SDS) provided by their end client.
Your SDS will tell you if your end client believes you to be ‘inside’ or ‘outside’ IR35. This is based – or should be based – on a review of your contract and working practices to determine if you are to be considered genuinely self-employed for this particular engagement (outside IR35) or if you should be treated as an effective employee in terms of taxation (inside IR35).
Bear in mind that each SDS is based on the terms of each engagement you have. So at any one time, you could be working multiple contracts for multiple clients and have different statuses for each of them. But what happens if you’re not happy with the conclusion of your SDS? Kingsbridge has all of the facts for you.
Can I appeal an SDS?
The short answer is yes, you can appeal an SDS if you don’t agree with it. Whoever produces your SDS (this would usually be your end client) is required by HMRC to have an appeal process in place. The rules set out by HMRC means that your client has to respond within 45 days of receiving your appeal, although it does not mean that they have to agree with you. It’s also worth noting that your original determination will stand during this period.
To appeal a determination, you should contact your client with the details that you disagree with and put forward your arguments as to why you believe the determination should be different. Be sure to highlight everything in your contract and working practices that supports your stance, including personal service/right to substitution, mutuality of obligation (MOO) and control.
Make sure you keep a record of all correspondence to refer back to and should your case ever be investigated by HMRC.
Should I go straight to an appeal if I’m not happy with my IR35 status?
The soft-landing put in place by HMRC for the first year of the IR35 reforms has now ended which means HMRC will come down a lot harder on those that don’t comply with the IR35 legislation. This includes not taking due care when determining a contractor’s status. If you’re not happy with your SDS it’s worth, then, simply flagging this with your client or recruiter.
The person responsible may give you a good reason why they gave the determination they did or, if they know they didn’t really give due care, they may go back to the drawing board. However, if you’re still not happy then you should submit an appeal using the process we outlined above.
What happens when I submit an IR35 status appeal?
Once you’ve submitted your appeal, as mentioned, your client has 45 days to respond. There are, ultimately, just two potential outcomes. If your client agrees with your appeal, you should be issued with a new SDS with your new determination and the reasons for it. If your client doesn’t issue this, be sure to push for it as you will need it for your records.
If your client disagrees with your appeal, they should let you know along with the reasons why they are upholding their decision. If they don’t give reasons, make sure you ask for them. If you’re not happy with their decision, you can choose to terminate the contract or continue working as inside IR35 and be taxed accordingly.
Bear in mind, this won’t affect other determinations with other clients.
What help can I get in determining my IR35 status?
If you are unhappy with your SDS and want to appeal, it’s definitely worth seeking independent advice to corroborate what you believe or, indeed, to confirm to you that the determination is correct. One way of getting such advice is to use a status determination tool.
While tools such as HMRC’s Check Employment Status for Tax (CEST) exist, contractors don’t generally find them to be reliable. An option that can give you more confidence in your determination is the Kingsbridge IR35 Status Tool.
This hybrid tool asks between 29 and 35 carefully crafted questions (which have been developed by Kingsbridge’s Head of Tax, IR35 specialist Andy Vessey) to get a rounded view of your contract and working practices. It will then generate an instant, accurate inside or outside IR35 status determination, along with a full report outlining the reasons for this status and the strengths and weaknesses of your case, ready for you to share with your end client.
If, however, your case is borderline, your answers are passed to one of our in-house IR35 experts for a manual review. After reviewing your case (and possibly asking you some further questions) they will issue your status and report. We believe that this hybrid approach is the best way to give you a quick, yet conclusive, result – all for just £50 plus VAT.
To find out more and get started, click here.