IR35 Status Determination Advice

IR35 is a tax law introduced to tackle tax avoidance by workers (also known as 'consultants' or 'contractors') supplying their services to clients via an intermediary. An intermediary is a party who makes arrangements for or pays an individual to work for a third party who would otherwise be an employee. 

Where the engagement falls inside IR35, the fees paid by the client (ie the person engaging the consultant) to the consultant are treated as employment income and subject to income tax and National Insurance Contributions. For more information, read IR35.

Since 6 April 2021, all public authorities and medium and large-sized clients are responsible for deciding the employment status of consultants. The rules apply to all public sector clients and private sector companies that meet two or more of the following conditions:

• they have an annual turnover of more than £10.2 million

• they have a balance sheet total of more than £5.1 million

• they have more than 50 employees

Clients will need to determine the employment status of a consultant every time they agree to a contract with them (or agency).

For more information, read IR35.

To determine a consultant’s employment status, all relevant facts need to be considered and evaluated and the basic features of the relationship established. Based on the facts and the nature of the relationship, the employment status should then be determined.

When determining a consultant’s status a variety of different factors need to be considered. These include:

• whether the consultant has to accept work provided by the client

• whether the client has to provide work to the consultant

• whether the consultant has a right to appoint a substitute, and

• the degree of control the client has over the consultant

For more information, read IR35 status determination.

A Status Determination Statement (SDS) is a document issued by the client which states the consultant’s employment status (either as an employee or as self-employed) for IR35 purposes. 

A copy of the SDS must be sent to the other parties the client contracts with (eg the consultant’s intermediary or agency), regardless of the determination’s outcome.

Rocket Lawyer has solicitors available to assist you with determining a consultant’s employment status for IR35 purposes. Our lawyers will arrange an initial free consultation to answer your questions about the process and give you a fixed price quote.

As part of this service, our lawyers will help you determine a consultant’s employment status by reviewing relevant documents, such as a consultancy agreement, and considering and evaluating all relevant facts relating to the consultant’s engagement.

Our lawyers will assist you with the drafting of a status determination statement, confirming whether the consultant falls inside or outside of IR35 and setting out the reasons for coming to this conclusion.