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Who decides your IR35 status is one of the most important questions in contracting, and one of the most widely misunderstood. The answer is not "HMRC", and it is not always "you". It depends almost entirely on one thing: the size of the client you are working for. The raised small company thresholds will eventually shift that responsibility for the contractors of around 14,000 reclassified companies, so it is worth getting the decision chain straight.

This guide walks through exactly who determines your IR35 status, how the process works, what happens if you disagree, and where HMRC fits in.

The short answer: it comes down to client size

Since the off-payroll reforms, IR35 has effectively split into two regimes depending on who you work for.

If your end client is a medium or large organisation, the off-payroll working rules apply (the rules in Chapter 10 of the tax legislation). The client decides your status and issues a Status Determination Statement.

If your end client qualifies as small, the original IR35 rules apply (Chapter 8). Your own limited company decides your status, and your company carries the risk if that decision is wrong.

That single distinction drives everything else. So the first question is never "am I inside or outside?" It is "is my client small, or medium and large?"

When your client decides: the Status Determination Statement

Where the off-payroll rules apply, your client cannot simply assert a status. They must produce a Status Determination Statement, or SDS. A valid SDS has to do three things: state whether your engagement is inside or outside IR35, give the reasons for that conclusion, and be reached with reasonable care.

That phrase, reasonable care, matters. A client who fails to take reasonable care can inherit the tax liability even if an agency sits between you in the chain. HMRC has been explicit that blanket determinations do not count as reasonable care. Deciding that every contractor who works through a limited company is automatically caught, without looking at the facts of each engagement, is specifically cited as bad practice.

The client must also pass the SDS down the supply chain. If any party in the chain fails to pass it on, that party can become the fee-payer responsible for deducting tax and National Insurance. The statement, in other words, carries liability with it as it travels.

If you want the wider picture of how the rules hang together, our IR35 rules 2026 guide sets out the full framework in plain English.

When you decide: small clients and the raised thresholds

If your client is small, none of the SDS machinery applies. Your limited company assesses its own status under the original rules, and there is no statement for the client to issue.

This is where the raised thresholds change the landscape, though later than most coverage suggests. For financial years beginning on or after 6 April 2025, the figures that define a small company increased substantially: turnover up to £15 million and balance sheet total up to £7.5 million, with the employee headcount test staying at 50. A company is small if it meets two of the three.

The off-payroll consequence does not follow straight away. A client's size for a given tax year is judged on an earlier financial year, and the test runs over two consecutive years, so HMRC's position is that the change has no practical impact for off-payroll working until 6 April 2027 at the earliest.

Raising those thresholds means more clients will count as small. A Department for Business and Trade estimate puts the medium-to-small reclassification at around 14,000 companies, in the impact assessment for the regulations. Note that this is a Companies Act figure rather than an off-payroll one, and it counts companies rather than contractors. Where a client does become small, responsibility for determining IR35 status reverts to the contractor's own company, and the determination and the risk move back onto you. Our breakdown of the threshold changes and their timing explains the lookback mechanism and why the April 2026 date circulating widely is wrong.

The practical point is simple. Do not assume today's position holds indefinitely, and do not accept a claim that responsibility has already moved to you without checking. If your client is medium or large now, they remain responsible through 2026/27. Check their filed accounts and their financial year end so you know when the change is likely to reach you, because once it does, the person deciding your status is you.

What if you disagree with the determination?

When a client issues an SDS you think is wrong, you are not stuck with it. Clients operating the off-payroll rules are required to have a status disagreement process. You can make representations, and the client must consider them and respond, normally within 45 days, either confirming the original determination with reasons or issuing a new one.

This is one of the more useful protections in the regime, and it is underused. A determination reached through a generic tool, or applied across a whole category of contractors without individual consideration, is exactly the kind that the disagreement process exists to test. A clear, evidence-led challenge that points to the actual facts of your engagement is far harder to dismiss than a vague objection.

Where HMRC fits in

Here is the part contractors most often get backwards. HMRC does not issue your determination. But HMRC can challenge any determination, whoever made it.

If your client decided your status, HMRC can still open an enquiry and argue the decision was wrong. And where you self-assessed because your client is small, you carry that risk directly. There is no client liability standing between you and HMRC in that situation.

That is why understanding the underlying test matters regardless of who holds the pen. The determination is only ever an opinion about how a tribunal would decide. A tribunal would apply the three conditions from Ready Mixed Concrete (1968): personal service, control, and whether the overall picture is one of employment or of being in business on your own account. It would also apply the Autoclenz principle that the real working arrangement, not just the written contract, is what counts. Our guide to mutuality of obligation explains one of those building blocks and why HMRC's own CEST tool handles it poorly.

How to know where you stand

Whoever issues your determination, you benefit from understanding your likely position first. If your client decides, you want to be able to recognise a poor SDS and challenge it credibly. If you decide, you need to assess your own status with reasonable care and keep the evidence.

A sensible starting point is to look at how your engagement scores against the case law rather than guessing. You can run your contract through the checker to see a probability-based read of your position, with the relevant cases cited against each factor. It will not replace a determination, but it will tell you whether the determination you have, or the one you are about to make, is likely to hold up.