First introduced in April 2016, the Supervision, Direction and Control (SDC) legislation has been amended in order to clarify the self-employed status. If a contractor has been deemed to be working under SDC, they can no longer be part of the Construction Industry Scheme and could no longer claim back travel and subsistence expenses if subject to SDC.
If it is not clear if the workers are working under SDC or not, they must complete a questionnaire which determines if their work is subjected to outside control. At Rocket Paye we can provide the workers with the SDC questionnaire and guide them to understand if they are working under SDC rules or whether the rules do not apply to them. If they are told HOW to work, WHERE and HOW, they are determined to NOT be self-employed and are then considered to be working under SDC legislation, meaning they can not claim travel or subsistence expenses.
For supervision to apply the worker will receive the overseeing of another person ensuring that they are actually doing the job and doing it to the required standard. Supervision can also mean assisting someone to develop their skills and knowledge.
Direction involves someone making another person do their work in a certain way, generally by providing instructions, guidance and advice as to how the work is to be done.
Control is where you have someone dictating what work a person does and how they should do it. This also includes the power to move the worker from task to task as priorities change.
Another key point is that a contractor is caught by SDC if any one of the three elements apply. So, a contractor may not be directed or controlled, but if they are supervised according to the above criteria, or if there is the right of supervision, then SDC applies.
HMRC explains in detail of what “supervision, direction or control as to the manner in which services are provided” means.
Taking a clients’ brief for a contractor to use when working on a project does not mean the SDC applies, as the work should be produced in a particular manner as per the clients’ specifications, but it is up to the contractor how he goes about achieving what end the client wants.
HMRC plans to use SDC for IR35 and to determine eligibility for expenses tax relief. As a result, contractors may not claim expenses they are entitled to, or may believe themselves to be inside IR35 incorrectly.
SDC is used to determine employment status in a collection of legislation that has become known as the Agency Legislation or the Employment Status Manual (link), which requires an agency to take into consideration the self-employed status of each individual, as if the contractors are found to be subject to SDC, then they must be placed on the payroll.
If you have any questions or need advice, please get in touch and speak to our team today to find out how our services could support you.