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Allow us to explain in further detail what these changes are and how they affect contractors.
HMRC says supervision 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.
PayStream note: a client checking, at the end of a job, that it has been carried out properly will not, on its own, amount to supervision.
HMRC says direction 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.
PayStream note: if your contractor has an expertise that the client does not, it is unlikely that the client will be able to direct them as to how to do their job.
HMRC says control is someone dictating what work a person does and how they go about doing that work. Control also includes someone having the power to move the person from one job to another.
PayStream note: if your contractors are filling in for a full time employee who is sick or on leave it is likely that they will be subject to SDC.
SDC over where the work is done, what is to be done and when it is to be done does not mean your contractors will necessarily be caught by the legislation; what is important is whether there is SDC over HOW the work is done.
To determine if SDC applies, HMRC will look at:
the terms of engagement i.e. what has contractually been agreed;
the way the work has been or is actually done.
The ‘SDC’ test is challenging to pass, as HMRC assumes contractors are under supervision, direction, or control (SDC) unless proven otherwise. Given the broad scope of SDC, most contractors are considered to be under some form of control, making it rare for umbrella companies or agencies to claim no SDC involvement. Processing regular expenses related to a main site carries risk, as HMRC may later disallow these expenses.
It provides the benefits of continuous employment, access to statutory benefits, comprehensive insurance cover, access to an in-house IFA, advances and more! Although travel and subsistence expenses are not permitted to a main place of work, other allowable expenses (such as claims in relation to adhoc journies to and from a temporary workplace) can be claimed via PaStream or through a P87.
Suitable for contractors who visit multiple temporary workplaces during the course of an assignment. Mileage can be relieved in relation to adhoc journies between temporary workplaces in line with HMRC approved mileage rates. Other allowable expenses captured on our mobile app or in our portal can be claimed either via PayStream where reimbursed, via a P87 (under £2,500) or by completing a Self-Assessment return.
If a contractor is found to be claiming T&S expenses in an umbrella company model where they are under SDC it is the employment intermediary operating the T&S scheme that is primarily liable if there is SDC or the right thereof. This means that umbrella companies that are offering a model which allows work to claim mileage to a main site on an ongoing basis need to ensure that they are carrying out thorough SDC tests and gathering substantial information in order to satisfy HMRC that there is no SDC.
It should also be noted that liability may fall on the agency and/or the client where "fraudulent documents" have been provided saying there is no SDC. Although fraud will be very difficult for HMRC to prove it is not difficult to see them making the point when all of an agency's workers are stated to be outside SDC.
There will no doubt be some umbrella companies that suggest a solution where all workers can claim T&S - this may be insurance backed (read the small print) or backed by an indemnity (worthless when you do the maths). We should not forget that it is these sorts of companies that have brought the spotlight on the industry.
We have spoken to many of our agency partners who understand that we need to work closer together. We encourage agencies to review their PSLs and for agencies to work only with those providers they can trust to operate within the rules, particularly bearing in mind the debt transfer risks.
Call our friendly agency support team.
