Supervision Direction or Control (SDC)
The introduction of further measures from HMRC from 6th April means that a contractor will only be able to claim travel (including subsistence) if the contract assignment they are working on falls outside Supervision Direction or Control (SDC). This is regardless of how the worker has structured him or herself.
So, if you are working as self employed or via an umbrella company you will need to assess your SDC status before you start your assignment in order to determine whether travel expenses will have tax relief applied to them or not.
SDC – The Detail.
From 6th April 2016 HMRC introduced new legislation relating to the way contractor status is determined and ultimately how they will be paid. While this is only one of a new wave of measures to tackle avoidance within the contracting industry, we must highlight that HMRC does not always get things right (IR35 is an example), but whatever it does, right or wrong, has far-reaching consequences.
As with all HMRC led initiatives things are not straightforward, so we will explain in detail.
Since 6th April a contractor can only claim travel (including subsistence) if the contract assignment they are working on falls outside of Supervision Direction or control. This is regardless of how the worker has structured him or herself.
HMRC have stressed they are only focusing SDC on the method of how the work is undertaken, not when and where, so a worker who is told where to undertake the work and at what time will NOT be under SDC for these purposes should he/she be able to determine how the work is then undertaken.
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A good example is an IT developer requested to visit the client site at 9 and leave at 6, being told what software platform to develop on. However, upon arrival at the site the developer receives instruction to design and implement a new piece of software to give a certain result.
The worker goes off and starts working autonomously in creating this software, stopping now and again to check in with a progress report for the client. The developer, being regarded as an expert, is therefore able to undertake the actual work as he or she sees fit.
In this scenario, the worker would be able to convince HMRC that while there is direction and control, there is no SDC in relation to how the work is undertaken.
While this example is a simple one to determine, others may be complicated because HMRC has suggested that SDC can be “implied”, so even if in practice SDC doesn’t happen but the client has the right to exercise SDC then the status would fail in this regard.
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