As you may be aware the Budget confirmed that the Government is going ahead with planned changes to the Travel & Subsistence expense rules for agency and umbrella workers. This change is effective from 6th April 2016 via legislation in the Finance Bill 2016.
The changes will restrict a worker's ability to get tax relief on his/her travel and subsistence costs unless it can be shown that the worker is not under the supervision, direction or control (SDC) of either the client, agency or PayStream in the way he/she carries out work.
HMRC has stated that it will assume that all agency and umbrella workers are subject to SDC unless the agency or umbrella company has gathered evidence to the contrary.
Those working through Personal Service Companies (PSCs) will not be affected by these changes provided they fall outside IR35.
What is Supervision, Direction or Control (SDC)?
Using HMRC's current guidance:
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
Points to bear in mind.
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 be caught by the legislation; what is important is whether there is SDC over HOW the work is done.
The Government has promised further guidance on the issue and so watch this space for further updates.
How will SDC be determined by HMRC?
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.
Compliance is therefore once again at the forefront of the changes and it is apparent that HMRC intend to observe a stringent enforcement policy. It is then more important than ever to ensure your contractors are on the right payroll model for their circumstances For more information on SDC please check out our guidelines here or email firstname.lastname@example.org.
At PayStream compliance is at the heart of everything we do and so we are well prepared to handle the changes and are engaging fully with your contractors to ensure they are properly versed on their options.