SDC: Supervision, Direction or Control has been the benchmark for HMRC when it comes to determining what expenses a contractor is eligible to claim.
While the rules are extensive and have many determining factors, the following question is a good indicator as to whether a worker will be subject to SDC.
“Does someone (anyone) have the right to tell the worker how to do their job?”
By this, we’re asking if there’s anyone who has the right to tell the contractor how they should go about executing a task in a specific manner, according to the end hirers’ specific guidelines. This isn’t a question of being told what to do or when to do it, but rather the question of how; given a rightful instruction as to the direct outline of how a function needs to be performed.
If the contractor can perform a task with complete independence, they are likely not subject to SDC. This is because they are probably an expert who has been taken on to perform a task which the end hirer likely does not have full knowledge on - and would have required an external resource for in any instance.
Subject to SDC or not? That is the question
We take the example below to demonstrate how SDC can be determined:
A student has recently become interested in learning computer coding, and her mother decides to contact an agency to source a tutor.
The agency puts the mother in contact with a reputable tutor in her area, and they decide on arranging lessons every Saturday for the next 10 weeks.
For the duration of the lessons, the mother of the student would have no right to tell the tutor how to go about conducting the lessons, nor would she be in the position to supervise the lessons. Although the mother, the tutor and the student chat about the student’s progress, it is more of an informal discussion to speak about where the student is excelling or needs more practice.
One Saturday morning, the tutor contacts the mother to advise her that he cannot make the regular meeting that day and offers to provide a double lesson the week after, or at a time during the week.
The agency that arranged contact between the mother (the end hirer) and the tutor (the contractor) also has no right to supervise, direct or control the tutor as to how he should fulfil his lessons with the student, how the lessons should be conducted or how the lesson content should be structured.
These facts above suggest that the tutor is providing a personal service and has the control over deciding how to conduct the lessons, how to structure them and how to facilitate the meeting times.
How exactly is SDC determined?
Simply put; employees of Parasol have their SDC status determined by looking at whether they are subject to, or under the right of, Supervision, Direction or Control by anyone in the way they provide their services whilst working on an assignment.
What expenses can be claimed if a worker is subject to SDC?
The biggest impact of being subject to SDC is on the expenses that can be claimed. It is important to note that a worker can still claim some business costs and client billable expenses whilst being subject to SDC.
- Client billable expenses – required to be approved before the expense is incurred. This expense type is pre-agreed between the end client and agency, and payment would be made from either of the two.
- Business Costs – always paid tax and NIC free, regardless of the assignment type.
- Electronic equipment - provided the items can be demonstrated to be an essential tool to complete the assignment.
- Parking – provided it is on-site at the assignment, or in proximity.
- Training and textbooks – provided the training or course is related to the assignment, you are eligible for reimbursement for textbooks or study material.
Parasol can assist with SDC
We’ve devised a series of questions to answer each time you start a new assignment and when you wish to claim expenses. The answers you provide us with and in addition the details we have on record about the assignment will help us to decide your SDC status.
Regardless of SDC status, we’ll ensure there is a compliant employment option for your contractor client. Call our Best Advice team to discuss the circumstances on 0800 458 0818, or send an e-mail to firstname.lastname@example.org.
If you would like to know more about the detailed guidance from HMRC on SDC, please refer to www.gov.uk.