Supervision, Direction and Control clarified

Supervision, Direction and Control clarified

Supervision, Direction and Control (SDC) was implemented on 6th April 2016. This came into place as a way of clamping down on umbrella contractors being allowed to claim for travel and subsistence expenses. It is necessary to know what an SDC is and whether you are subjected to it?

On 6th April 2016, Supervision, Direction and Control (SDC) came into effect as a method of preventing umbrella contractors being allowed to claim for travel and subsistence expenses. It is important you know what an SDC and if you are or are not subjected to it?

Due to the new legislation is has caused a substantial amount of contractors working through an umbrella company to decrease, preventing them to claim taxi relief on travel and subsistence expenses.

The introduction of the new rule has seen a significant decrease in the number of contractors working through an umbrella company able to claim tax relief on travel and subsistence expenses.

HMRC claim that a large amount of contractors working through an umbrella company were actually being treated exactly the same as employees in permanent positions with the same client. Generally, claiming tax relief for home-to-work travel and subsistence is not permitted in a permanent role. From April 2016, this has affected contractors working through an umbrella company the same. There are exceptions however to this rule, as it can be adapted and disapplied in certain circumstances. For example, where the work place categorises it as temporary workplace, or if the travel or relevant subsistence is not believed to be the average commute or private travel.

Defining SDC

The definition in accordance to the HMRC for Supervision, Direction and Control is as below:

• Supervision is another body supervising a person doing work, to guarantee the work being done is completed correctly and to the desired standards. Supervision also in tales assisting the person where needed, so they can improve and gain skills and knowledge.
• Direction is someone telling a person how to work in a specific way by giving them strong instructions, guidance or advice on how the work must be complete. Someone offering direction will frequently organise how the work is complete, as it commences.
• Control is someone determining and dictating what a person does during their work and how they operate doing that work. Control also compromises of someone having power to move the person from job to job.

What are travel expenses?

For umbrella contractors who are still permitted to claim travel expenses below are those included:

• Travel that is required for the contractor to do what your project requires
• Journey to and from a worksite (not including normal commuting)

Claiming travel expenses, it is likely that you would have agreed this before starting the contract. HMRC has more advice on this that shows the guidelines on their official website.

What is subsistence expenses?

This covers costs such as expenses that arise when on a business trip, including:

• Food & Drink
• Accommodation

Similar to travel expenses, you are likely to have agreed on a limit with your client that is in agreement to HMRC benchmarks.

How do you determine your SDC statues?

Ensuring the umbrella company you are using is a reputable company, they can provide you with guidance to verify whether or not you are subjected to SDC when completing your requirements of your assignment. Through the registration process you will be questioned about you responsibilities and your work environment. If your results show you are not subjected to SDC within the workplace you must complete a more in-depth questionnaire. You must make sure you answer these questions honestly, so you don’t incur any punishments from HMRC because of alleged tax avoidance.

If I qualify to SDC, does this mean no expenses at all?

Sadly, for umbrella contractors being subjected to SDC disables your allowance to claim tax relief on travel and subsistence. However, if you are a mobile worker, you can still claim for travel expenses for the travel between temporary worksites.

Why should you still consider using an umbrella company?

Due to the SDC being introduced, it seems that umbrella companies are becoming a less attractive payroll option compared to contracting via a limited company. Although using an umbrella company may not give you the highest take home pay, there are still plenty of benefits

for contractors who operate through them. These include:

• Employee benefits compromising of Sick Pay, Annual Leave, Paternity Pay and Maternity Pay.
• As long as you use a compliant umbrella company, your PAYE salary deductions including correct tax and National Insurance will be made on your behalf.
• Insurances such as Public Liability, Employers’ Liability and Professional Indemnity are included.
• There is minimal administration due to the umbrella company doing the majority of it. This only leaves you to submit your timesheets, upload these onto an online portal and send a copy to your recruitment agency.

Since 1998, Churchill Knight & Associates Ltd have helped over 10,000 contractors legally maximise their take-home pay.