The Client-Led Disagreement Process Explained for Contractors

The client-led disagreement process explained for contractors

If you have received a Status Determination Statement (SDS) from an end client and you think it is wrong, you are not simply stuck with it. HMRC's off-payroll working rules include a formal route for challenging a determination: the client-led disagreement process. This guide explains how it works, what the timescales are, and where to find the primary HMRC sources.

This is general education, not a verdict on any individual's status. IR35 status is fact-specific and depends on the actual working practices on a contract, so if you are unsure where you stand, speak to a specialist IR35 contract reviewer or your accountant.

What is an SDS, and why might you disagree with it?

Under the off-payroll working rules, a medium or large private-sector end client (or any public-sector client) engaging a worker through an intermediary, typically a personal service company, must issue an SDS setting out whether the engagement falls inside or outside IR35. The client must take reasonable care when producing this determination, as set out in HMRC's Employment Status Manual.

You might disagree with an SDS for several reasons: the client's reasoning may not reflect how the contract is actually worked, key indicators such as substitution or control might have been overlooked, or the working practices may have changed since the determination was made. Whatever the reason, HMRC guidance confirms that both the worker and the deemed employer (the fee-payer in the labour supply chain) have a right to raise it.

The disagreement process, step by step

HMRC's guidance describes this route as the client-led status disagreement process, provided for in legislation at section 61NA of the Income Tax (Earnings and Pensions) Act 2003. In practice:

1. Raise representations with the end client. The challenge goes to the client that issued the SDS, not to HMRC and not to the recruitment agency in the chain (though the agency may help pass it on). HMRC's guidance for workers says you can raise representations if you disagree with a determination or think it is no longer accurate.
2. Set out your reasons clearly. HMRC's manual advises linking your disagreement to the actual employment-status indicators, such as substitution, control, and the wider working arrangement, so the client has enough information to properly reconsider the case. A vague objection is less likely to succeed than one grounded in the specifics of how the role is actually performed.
3. The client must respond within 45 calendar days. From the day the representations are received, the client has 45 calendar days to consider them and respond. The response must either confirm the original SDS is correct, with reasons, or confirm it is being withdrawn, with a new SDS issued and its effective date stated.
4. Tax treatment stays the same while this is ongoing. HMRC's published guidance is explicit that the client must leave the existing tax treatment unchanged while the disagreement is being considered. Nothing changes automatically just because a challenge has been raised.
5. In supply chains, the SDS passes down the chain. Where there is a labour supply chain, HMRC guidance says the client should pass the SDS (and any revised SDS) down to the party immediately above the worker's own intermediary, so the correct fee-payer is kept informed.

You can find HMRC's own walkthrough in its client-led disagreement process guidance (part 10) and in ESM10015.

How long can you wait before challenging?

There is no fixed deadline early in the contract, but HMRC guidance says disagreements can be raised at any point up until the last payment is made for the worker's services. After that, there is no SDS left to challenge because the engagement has ended.

What happens if the client changes size or status?

The legislation also deals with what happens if a client stops being medium or large. Section 61TA of the Act sets out a duty on the client to withdraw an SDS in these circumstances, which is a separate mechanism from the disagreement process itself but worth knowing about if your engaging organisation's size status changes during a contract.

What the process does not do

It is worth being clear about the limits of this route. The client-led disagreement process is a mechanism for the client to reconsider its own determination, supported by the reasons and evidence you provide. It is not an independent tribunal, and neither this platform nor any job board can verify, override, or guarantee an outcome. The end client remains legally responsible for the SDS, and only the client can issue a new one.

If you believe the disagreement process has not been followed correctly, or that your employment rights are affected by how you are engaged, the body responsible for enforcing employment rights is the Fair Work Agency (FWA), not HMRC and not this site.

Where to go next

For contractors looking to understand how off-payroll status is assessed more broadly, it is worth reading around substitution and control as the leading indicators following the Supreme Court's PGMOL judgment, rather than relying on older "mutuality of obligation" arguments. You can also browse outside-IR35 contracts currently listed, or check day-rate benchmarks to see how rates compare across sectors while you weigh up a role.

This platform does not determine, verify, or warrant IR35 status; the SDS is the client's legal responsibility. Contractors should take their own advice and consider IR35 insurance.