What is Supervision, Direction and Control (SDC)?

Previously, contractors working through umbrella companies were able to claim a variety of travel and subsistence expenses. However, since the introduction of Supervision, Direction and Control (SDC) in 2016, the number of umbrella company contractors able to claim travel and subsistence has significantly decreased as they are caught by the legislation. Continue reading to find out more about SDC.

Background to Supervision, Direction and Control

Supervision, Direction, and Control (SDC) came into effect on 6 April 2016 as HMRC believed that a substantial number of contractors working through umbrella companies were claiming expenses when they shouldn’t be. This is because they were being treated identically to employees in permanent positions. Tax relief is not available for home-to-work travel and related subsistence to workers in a permanent role. As of April 2016, the SDC significantly limited the number of umbrella contractors able to claim travel and subsistence expenses.

What is Supervision, Direction and Control

SDC determines whether or not a person has the freedom to choose how they conduct and undertake the work, or instead, does someone else dictate how the work is done by giving directions or instructions. SDC is defined as:

• Supervision—Someone oversees an individual’s work to ensure it is done correctly and to the required standard. Supervision can also involve providing guidance or helping the individual develop their knowledge or skills.
• Direction—Someone provides guidance, instructions, or advice to ensure an individual is doing the work in a certain way, often coordinating how the work is done.
• Control – Someone is dictating how an individual does the work and what work is done. It also includes having the ability to move an individual from one job to another.

Contractors must understand how HMRC’s rules on SDC work and how they apply, as it is used to determine whether the ‘agency legislation’ applies to workers.

What happens if you are subject to Supervision, Direction and Control?

If you are subject to Supervision, Direction or Control, you cannot claim tax relief on travel and subsistence expenses. However, there are exceptions. If you are required to travel away from your principal place of work, you may be able to claim travel and subsistence costs as reimbursed expenses – just like a permanent employee working away for a short period.

Why should you still consider using an umbrella company even if you can’t claim expenses?

Even though the ability to claim tax relief on travel and subsistence expenses has been significantly restricted, there are still many benefits of using an umbrella company for your payroll:

• You don’t have to worry about IR35 as your tax and National Insurance Contributions are calculated via PAYE and paid to HMRC. Providing you use a compliant umbrella company (look for the FCSA accreditation or SafeRec certification), you can rest assured that your payments will be processed legally and legitimately and as per UK tax law.
• You will benefit from continuity of employment, which means you can take on various roles with different end clients, and your umbrella company will remain your sole employer.
• Umbrella companies are the easiest way to get paid as a contractor. All you need to do is submit a timesheet (if required), and the umbrella company will take care of the rest!
• When you become an employee of an umbrella company, you will be given access to statutory benefits such as Maternity/Paternity Pay and Sick Pay.
• Umbrella companies offer a comprehensive insurance package for free as part of the service, which includes Employers’ Liability Insurance, Professional Indemnity Insurance, and Public Liability Insurance.
• You are automatically enrolled into a workplace pension scheme, which makes saving for retirement easy. However, you do not have to make contributions if you do not want to and can opt out after the first payment. Churchill Knight Umbrella also offers a salary sacrifice service for contractors who are interested in building their pension pots and saving tax-efficiently for retirement.
• Umbrella companies often offer exciting extras, such as rewards for referring a contractor and an employee reward scheme (Churchill Knight Rewards) that gives you access to discounts for online and high-street retailers.

Contact us today to find out more about our umbrella service

If you are interested in registering with an FCSA-accredited or SafeRec-certified umbrella company, please call our Sales Consultants at 01707 871622. You can also request a take-home pay illustration or schedule a call for a time that suits you, and a member of the team will be in touch to discuss the service with you.