Who Is Responsible for IR35 Status?

Who Actually Decides IR35 Status?

This is one of the most common and most misunderstood IR35 questions.

Many contractors assume responsibility always sits with the client now. Others believe it still sits entirely with them. Both views are incomplete.

The truth is more nuanced: who decides IR35 status depends on who you work for, and who carries the consequences depends on how the decision is made.

Understanding this distinction matters, because it affects:

• Liability

• Risk exposure

• How disputes are handled

• How much control contractors really have

This article explains how responsibility works in practice, not just how it’s described in legislation.

Why Responsibility Became Such a Big Issue

Originally, IR35 responsibility sat with the contractor’s limited company.

HMRC believed this created a conflict: contractors decided their own status and benefited from being outside IR35. Whether or not you agree with that logic, it led to reform.

The reforms were designed to move responsibility up the supply chain, closer to the end client, where HMRC believed better compliance could be enforced.

Public Sector: Responsibility Shifted First

In the public sector, responsibility moved in 2017.

Under these rules:

• The public sector client decides IR35 status

• They must issue a Status Determination Statement (SDS)

• They carry liability if the decision is incorrect

Contractors no longer self-assess status in public sector engagements.

This shift was a testing ground for the wider reforms that followed.

Private Sector: Where Things Get Complicated

In the private sector, responsibility depends on the size of the client.

Medium and Large Clients

For medium and large private sector organisations:

• The client determines IR35 status

• The client must issue an SDS

• The client must take reasonable care

If they fail to do so, liability can remain with them — even if tax is unpaid.

Small Companies

If the client qualifies as “small” under Companies Act rules:

• Responsibility remains with the contractor

• The contractor’s company decides IR35 status

• The original IR35 rules apply

This distinction is critical and frequently overlooked.

What “Reasonable Care” Actually Means

Clients aren’t just required to issue an SDS. They must take reasonable care when doing so.

Reasonable care generally involves:

• Assessing working practices, not just contracts

• Using informed judgment rather than blanket decisions

• Providing reasons for determinations

Blanket “inside IR35” decisions are widely criticised because they suggest reasonable care was not taken, even if they remain common.

Where Liability Sits When Things Go Wrong

Responsibility and liability are related, but not identical.

If:

• A client issues a careless or incorrect SDS

• Or fails to issue one at all

Then liability can remain with them — not the contractor.

However, if:

• Information provided by the contractor is inaccurate

• Working practices differ from what was described

Then risk can flow back down the chain.

This is why contractors still need to engage seriously with IR35, even when they don’t make the final decision.

What Contractors Are Still Responsible For

Even under the reformed rules, contractors remain responsible for several critical areas:

• Providing accurate information about working practices

• Operating their company correctly

• Maintaining evidence that supports the engagement

• Managing enquiry and reputational risk

Responsibility for status determination does not mean responsibility for nothing else.

This is a subtle but important distinction.

Why Contractors Can’t “Switch Off” Under Client-Led Determinations

Some contractors assume that if a client decides IR35 status, they’re fully protected.

That assumption can be risky.

Contractors can still be affected by:

• Contractual disputes

• Retrospective challenges

• Client errors that impact income

• Investigations into historical periods

And while tax liability may sit elsewhere, stress, disruption, and uncertainty still land with the contractor.

Agencies, Fee-Payers, and the Supply Chain

IR35 responsibility often flows through multiple parties:

• End client

• Recruitment agency

• Umbrella company

• Contractor

The “fee-payer”, the entity that pays the contractor, often carries PAYE responsibility for inside-IR35 roles.

Understanding where you sit in this chain helps clarify:

• Who deducts tax

• Who issues documentation

• Who HMRC will approach first

Complex supply chains increase the chance of miscommunication and mistakes.

Challenging an IR35 Determination

If you disagree with an SDS, you have the right to challenge it.

The client must:

• Consider your challenge

• Respond within 45 days

• Either confirm or amend the determination

This isn’t a guarantee of change, but it does create a formal process and a paper trail.

Understanding your position allows you to challenge intelligently, not emotionally.

Why Responsibility Feels So Blurred in Practice

IR35 responsibility feels unclear because:

• Different rules apply in different contexts

• Liability shifts depending on behaviour

• Contractors still carry indirect consequences

The legislation moved responsibility, but it didn’t remove uncertainty.

That’s why understanding IR35 responsibility is as much about commercial awareness as legal definition.

A Practical Way to Think About Responsibility

Instead of asking “Who decides IR35?”, ask:

Who carries the consequences if this decision is wrong?

That answer often reveals where real responsibility lies, regardless of what the SDS says.