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contractor 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 you are subject to SDC as it will have an impact on the expenses you can claim. If you are expected to know HOW to do your work and if no-one has the right to tell you HOW to do it then you will probably pass the SDC test.

How will the travel and subsistence changes affect Umbrella contractors?

If you are subject to SDC (supervision, direction or control) then there will be an impact on your take home pay as you will no longer be able to claim expenses for travel and subsistence. However you can still continue to benefit from being employed by an umbrella company and take advantages of continued employment status and benefits such as maternity and sickness pay etc. You will be able to claim mileage between different sites and PPE etc.

What are the rules re the reimbursement of expenses?

HMRC sneaked in legislation that says if your 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 I'm afraid all other expenses must be claimed at the year end to get the tax relief.

How can a contractor change from Umbrella to Limited?

Changing from umbrella to limited doesn't have to be complicated or time consuming. Company incorporation takes less than 24 hours and all insurances will be issued immediately. If you think this might be the right option for you then get in touch, our sister company Exchequer Accountancy Services can help with everything from the initial set up to ongoing support.

Can all Umbrella contractors set up as Limited?

In theory yes any contractor could set up a limited company (unless you are disqualified from being a company director for example due to bankruptcy).

However the financial benefits start once you are earning at least £12 per hour and the potential benefits increase as earning increases.

I've been told that from April 2016 I should operate as a PSC, is this the case for all contractors?

Not necessarily, there really is no one size fits all approach. For example if you are on a lower hourly rate there probably wouldn't be any financial benefit or if you are only intending to contract in the short term and intend to return to traditional employment it might not be worthwhile.

We recommend that you look at your own earnings, personal circumstances, future plans etc before reaching a decision on which approach will work best for you. We can help with this and are happy to talk through your options with you.

Who is ultimately responsible for ensuring I am compliant? - is it me, my recruitment agency or the umbrella?

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

In terms of liability, if you are operating as a PSC unless the agency forced you down this route then the agency can't be held liable. Liability rests with the company director.

The important thing is to ensure you are well informed. Ask questions and do your research as in most circumstances it is ultimately the responsibility of the individual to comply.

Will all umbrella contractors be financially worse off?

No, not everyone will be. If you aren't subject to SDC you can continue as normal and will still be entitled to claim legitimate expenses for travel and subsistence.

I work in construction, is CIS still a viable option?

Yes, CIS is still a viable option for workers in the construction industry. If you aren't subject to SDC and work in construction then CIS is still a popular choice for lots of contractors.

I'm currently on an umbrella scheme. Do I have to do anything?

You don't have to do anything. If you don't currently claim travel and subsistence expenses then nothing will change for you. If you do claim for travel or subsistence then you might want to consider your options. If you are subject to SDC and remain on an umbrella scheme then you will no longer benefit from tax relief on travel and subsistence expenses but you can continue to operate in this way and continue to benefit from employment status and the other benefits which go with a contract of employment.

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. If you are offered a scheme which promises unrealistic take home pay then we'd advise you to do more research. We'd always recommend working with a company that you trust, are fully compliant and are transparent about how they work.

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!

Can my recruitment agency tell me what to do and which company to use?

No. Your recruitment agency should be able to present you with the facts and discuss the options. They will work with organisations like Exchequer to establish whether an individual worker is subject to SDC but when it comes to making a decision that should be up to you.