Earlier this month, to coincide with the passing into law of new rules on travel and subsistence (T&S) expenses, HMRC published guidance on supervision, direction or control (SDC).
In case you’ve been living under a rock for the past few months, supervision, direction or control (SDC) is the new test for determining an umbrella company contractor’s eligibility for home-to-work T&S expenses.
Specifically, if you’re a contractor working through an umbrella company and you’re supervised, directed or controlled in the way you carry out your duties whilst on assignment, you are no longer eligible for these expenses.
You are also ineligible if someone has the right to supervise, direct or control you.
Clarity or confusion?
There has been plenty of confusion and scaremongering in recruitment, contractor and umbrella circles over what constitutes SDC ever since the T&S reforms were first announced.
HMRC’s guidance isn’t a huge help for those in the dark, either.
In it, the tax authority gives a few example scenarios but admits that there is no definition of the meaning of the SDC test in law.
HMRC also acknowledges that “the meaning of the SDC test hasn’t been considered before tribunals or the courts.”
As a result, it will consider the “ordinary meaning” of the words when deciding if the new rules have been applied correctly.
Umbrellas’ different directions
Many in the industry are still unsure how SDC tests will work in practice.
Some umbrella companies think the whole thing is far too complex and have introduced a blanket ban on expenses.
The fact that umbrella companies and their directors will be liable if the new rules are misapplied may well have been a factor in their decision.
Here at ADVANCE, however, we are happy to absorb the risk and bear liability as dictated by the legislation.
We are liaising with our agency partners and carrying out in-depth status tests with our umbrella employees.
If we are satisfied that a contractor is not supervised, directed or controlled they are still able to claim home-to-work T&S expenses.
We feel confident in our ability to apply the new rules correctly thanks to the SDC experience we have gained in the self-employment sphere over the past two years.
During this time we have stood alone in the industry by offering an FCSA-approved self-employment solution – at the heart of which lies a robust, rigorous and accurate assessment of a contractor’s SDC status.
We have developed bespoke, compliant self-employment solutions for several recruitment businesses.
They are happy to offer self-employment as an option to their contractor candidates, despite the fact that liability sits with them as the agency.
This experience and expertise in SDC means we’re uniquely placed to help agencies and contractors navigate the changes to umbrella.
SDC: building a complete picture
So how will new supervision, direction or control status tests work?
We can’t speak for all umbrellas but – as well as working closely with the agency in question – we’ll be looking at a contractor’s role, status, pay rate, skill level and a range of other factors in order to build a complete picture.
Remember, the aim is to ascertain if the contractor is subject to SDC in the manner in which they perform their duties.
Is someone standing over their shoulder? Does the contractor have a degree of freedom and independence in the way in which they complete their assignment, project or role? These are the key issues.
Supervision, direction or control may be a somewhat subjective test but – as with so many things in life – experience counts for a lot.