Taxman preparing 'SDC' guidance
So before the close of March, or anytime between two weeks from now and following Budget 2016, the ‘SDC’ guidance will be unveiled so contractors can gauge eligibility to T&S relief.
This timeline, outlined yesterday by umbrella firms that met with HMRC, provides for only as much as a few weeks until the T&S legislation comes into force (on April 6th).
Indeed, despite meeting with tax officials for two hours, All Umbrella Companies Are Equal says HMRC’s approach to SDC, and the approach for taxpayers to disprove SDC, is still “as clear as mud”.
At the meeting, HMRC cited cases where it said SDC was spelt out in terms clear enough to inform those who are potentially subject to SDC – umbrella workers, and PSCs inside IR35.
But problematically, those cases are either not available to read as a full transcript, or conclude with rulings where the worker was not an employee (implying an absence of SDC).
Trying to get HMRC to elaborate on ‘how to prove a negative’ (- in this case, that SDC is absent, as is ‘the right of’ SDC, which the draft legislation specifies), AUCAE asked which workers may be out of scope.
Positively, HMRC agreed that certain groups of workers could be outside the legislation, which is due to be finalised on March 15th and 16th.
The department has already produced some status examples pertinent to IT contractors, a ‘controlled’ computer worker; a ‘SDC’ consultant, and that same consultant outside of ‘SDC.’
However when presented with sector-specific workers at the meeting, HMRC declined to say whether people in the said-occupations would - or would not - typically be out of scope.
“The reason for this is that Finance Act 2015 contained restrictions which effectively ban ANY AND ALL expenses being offset through PAYE on an ongoing basis from April this year, if the payment model in question qualifies as a salary sacrifice scheme…which umbrellas as we currently know them are.
“So that effectively means that from April , the current umbrella model reverts to a simple outsourced PAYE model with no expenses at all being able to be offset on an ongoing basis to reduce the worker’s weekly or monthly tax bill,” says Marc Scott, director of Liberty Bishop.
He adds: “Whether or not an umbrella worker is under SDC only determines whether or not the worker can legitimately offset T&S expenses at the end of the tax year via self-assessment, since the end of year self-assessment will be the ONLY place where any expenses incurred by umbrella workers can be offset.”
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