As of 6th April 2016, HMRC introduced new legislation which affects the claiming of tax relief on expenses for umbrella employees. The primary objective was to reduce tax avoidance by contractors. The rules dictate that umbrella employees will no longer be able to offset their full range of expenses if they are deemed to be working under supervision, direction or control (SDC) or the right of.
If you are working via an umbrella company such as SmartWork 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. If there is genuinely no SDC you will be able to claim back expenses at the end of the financial year. The only exclusion is that mileage can be offset on a weekly or monthly basis if there is no SDC.
For the purposes of the agency legislation, HMRC considers supervision, direction and control are best defined as follows:
- Supervision (S) is someone overseeing a person doing work, to ensure that person is doing the work they are required to do and it is being done correctly to the required standard. Supervision can also involve helping the person where appropriate in order to develop their skills and knowledge.
- Direction (D) is someone making a person do his/her work in a certain way by providing them with instructions, guidance or advice as to how the work must be done. Someone providing direction will often coordinate how the work is done, as it is being undertaken.
- Control (C) is someone dictating what work a person does and how they go about doing that work. It also includes someone having the power to move the person from one job to another.
Will I be affected?
When HMRC are considering if the provisions of the agency legislation apply to workers, they are looking at whether or not that worker has the freedom to choose how they do their work, or instead, does someone have the power or authority over the worker to dictate how the work is done, by imposing control over them, subjecting them to supervision or giving them directions.
As a general rule HMRC considers those agency workers who personally provide services to work in industries where the manner in which they work is governed by regulations or some other statutory framework or standards, will be subject to the right of SDC, and it is likely that in practice, they will be subject to SDC. That is because somebody will have the right to check that their work complies with those standards. To check that the workers are complying somebody will need to have the right to supervise their work and, if appropriate, direct or control how the worker does their work. The types of workers will include but are not limited to health care workers such as doctors, nurses, social care workers such as social workers and social work assistants, teachers and teaching assistants.
To find out your (SDC) status you will need to complete an SDC questionnaire – please contact your Business Manager for more information.