Since the 6th April 2016, SDC (Supervision, Direction & Control) has limited the number of contractors who are allowed to claim travel and subsistence expenses. Find out how SDC works and whether it applies to you.
It was put in place to expose any contractors claiming expenses that were, in fact, operating the same as a permeant employee working for one client.
As a rule tax relief is not available for home-to-work travel or any subsistence for those in permanent employment. As of April 2016, this rule also applies to contractors operating through an umbrella company. Although, there are circumstances where this rule can be disapplied or modified such as if the workplace is classed as a temporary place of work or if the travel is not classed as private or standard travel.
Please see below HMRC’s definitions for SDC:
Supervision – if someone is overseeing another person doing work to make sure they are working to the standards required.
Direction – if someone is instructing someone how to do their work either through guidance or advice.
Control – is someone dictating where, what and how someone does their work. This also includes if someone has the power and authority to move a person from job to job.
What can I claim under travel expenses?
For contractors that can still claim expenses, these include:
- Any journey that is not the normal commute that is required to or from a site
- Travel that is required to complete the job role
- Travel from your home to a temporary workplace
If you are eligible to receive tax relief then you should have an agreed amount with your client. If you would like further clarification on this, please visit HMRC’s official website.
What is Subsistence?
Subsistence is in reference to costs that may occur when you are on a business trip. Such as:
It is wise to also agree on a limited with your client before you commence work in guidelines with the HMRC.
How can I determine my SDC status?
You can use any reputable umbrella company provider to determine this and they should be able to offer you support in deciding whether you are subjected to SDC when carrying out your contract. If you do have to undertake an assessment on this then you will be asked some questions about your work environment and responsibilities. If you are not subjected SDC then it is required you fill out a further questionnaire. It is important you answer these questions honestly as you could incur penalties from HMRC if you are seen to be attempting tax avoidance.
What are the benefits of using an umbrella company?
Since April 2016, umbrella companies have become significantly less attractive payroll option compared to the limited company option. Although, an umbrella company may not maximise your take-home pay like a limited company there are still plenty of benefits to be aware of:
- Minimal administration required because the umbrella company cover this for you. All you need to complete and submit is your timesheets onto an online portal and forward a copy to your recruitment agency.
- You are entitled to employee benefits including Annual Leave, Sick Pay, Paternity Pay and Maternity Pay.
- You will receive Employers’ Liability, Professional Indemnity and Public Liability insurance included.
- Tax and National Insurance deductions are made on your behalf so you will receive PAYE salary without any hassle – make sure your umbrella company is compliant with these deductions.