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Top 12
agency questions

What is this SDC test I keep hearing about?

It relates to Supervision, Direction or Control or SDC as it is commonly referred to. It is important to establish whether your workers are subject to SDC as it will have an impact on the expenses they can claim. For those workers who are expected to know HOW they carry out their work and if no-one has the right to tell them HOW to do their work then they will probably pass the SDC test.

How will the travel and subsistence changes affect Umbrella contractors?

If the worker is subject to SDC (supervision, direction or control) then there will be an impact. They will no longer be able to claim expenses for travel and subsistence. For many individuals who are currently registered on an umbrella scheme this will mean a significant drop in take home pay. However workers can still continue to benefit from being employed by an umbrella company and the advantages of continued employment status.

What are the rules re the reimbursement of expenses?

HMRC sneaked in legislation that says if a worker's Taxable pay goes up and down depending on the expenses incurred then the expenses will be taxed, effectively removing the benefit. Mileage is however still allowed. Therefore mileage can be paid weekly but unfortunately your workers will have to wait to until the year end to claim tax relief on all other expenses.

How can a contractor change from Umbrella to Limited?

Changing from umbrella to limited doesn't have to be complicated or time consuming. We're happy for you to pass on our details to your workers and we'll take care of everything. Company incorporation takes less than 24 hours and all insurances will be issued immediately.

Can all Umbrella contractors set up as Limited?

In theory yes, there are no restrictions (unless the individual is disqualified from being a company director for example due to bankruptcy.)

However the financial benefits start for those earning at least £12 per hour and the potential benefits increase as earning increases.

Should all contractors be setting up as PSC from April 2016?

Not necessarily, there really is no one size fits all approach. For example some lower paid workers wouldn't benefit financially as they don't earn enough to really benefit from the tax efficiencies. Other individuals may only be intending to contract in the short term and consequently it wouldn't be worthwhile.

We recommend that each individual looks at their own earnings, personal circumstances, future plans etc before reaching a decision on which approach will work best for them. We can help with this and are happy to talk through the options with the contractors.

Who is ultimately responsible for ensuring workers are compliant - the individual, the agency or the umbrella?

The Recruitment Agency is responsible for ensuring they have a compliant supply chain but it is complicated.

In terms of liability, where there is a PSC in the chain, unless the agency has forced them to go Ltd, then the agency can't be held liable.

The important thing is to offer individuals reliable information and allow them to choose. If an agency has presented them with all the options then it is the responsibility of the individual to comply.

Will all umbrella contractors be financially worse off?

No, not all of them will. Those who aren't subject to SDC can continue as normal and will still be entitled to claim legitimate expenses.

What options are available for lower paid workers?

For lower paid workers PAYE is the straight forward, compliant option. With our Exchequer PAYE service we can take care of all the administration involved in paying your workers, freeing you up to get on with recruiting.

Is CIS still a viable option?

CIS is still a viable option for workers in the construction industry who aren’t subject to SDC. We can support workers on the CIS scheme with our services. However if the worker is subject to SDC then the individual should be paid on a PAYE basis. For individuals where this applies we can pay them on our Exchequer PAYE scheme at a discounted margin as we no longer process expenses for them.

Can we persuade workers to move to PAYE/set up as Ltd?

You shouldn't! You have a responsibility to provide your workers with the facts, you should be able to support them in making a decision by providing them with relevant figures and explaining the pros and cons of the different models. Ultimately the individual should make a decision about the option which suits them best based on their personal circumstances.

What about new schemes?

We'd always advise caution where new schemes are concerned. If something sounds too good to be true it probably is. Recently there have been some new schemes entering the marketplace which promise the earth and some organisations are even asking people to sign non-disclosure agreements before sharing the details.

This should ring alarm bells. When advising your workers it can help if you have a PSL which includes reputable organisations that you are happy to work with and recommend.