Contractor Top Tips – How do I go about demonstrating that I am not subject to SDC?
If you are a contractor you will no doubt have heard the term SDC. SDC stands for supervision, direction and control. Whether an individual is subject to SDC (or the right thereof) by any other person has become important because of the impact it has on what expenses an individual is entitled to claim.
We are often asked by our contractors what evidence they need to demonstrate that they are not subject to SDC. You might have heard people talk about the SDC test. The problem is how exactly do you prove that you aren’t told what or how to do your work and that you are not managed or supervised when delivering your services?
Unfortunately the onus is on the individual to be able to back up any claim that they are not subject to SDC. HMRC will make the assumption that umbrella employees are generally subject to SDS and anyone claiming they aren’t needs to be in a position to substantiate that claim.
When the changes to expenses for travel and subsistence first came into force in April 2016 many people assumed that simply signing a waiver which stipulated a lack of supervision, direction or control would be adequate but HMRC have been clear that this is not the case.
HMRC have stated that when they test SDC cases they will be looking at all aspects of the individual’s work. Contracts will almost certainly form part of any investigation by HMC as will any other related documents. They may also speak to any parties involved including the end client, the recruitment agency, site managers and any intermediaries such as umbrella companies.
There is no specific form to fill in or list of approved documents required but we would recommend that before any individual claims lack of SDC they are confident that in the event of HMRC testing their claim they would be able to back it up. Having a clear, professional, contractual agreement in place is a good starting point.
We also recommend keeping a paperwork trail which backs up your claim. Ensuring that everyone involved such as the recruitment agency and your end client has a thorough understanding of the service you are offering and the nature of the specific contract is also important. If everyone involved agrees and understands that you are expected to know how to do your work and that no-one has the right to tell you how to carry out your work then this will certainly support your claim.
If you are unsure about your status with regard to SDC then do talk to us. We would be happy to discuss your current contract and individual circumstances with you.