Contractors’ Questions: How to prove I’m not Supervised, Directed or Controlled?

Contractor’s Question: How can I prove that I am not under Supervision, Direction or Control (SDC), or obtain proof for HMRC or my umbrella that the right to SDC does not exist?

Expert’s Answer: New restrictions on claiming tax relief on travel and subsistence expenses came into force on 6^th April 2016 for those workers engaged on work assignments via an employment intermediary (such as an umbrella company).

These restrictions mean that any worker that is deemed to be under Supervision, Direction or Control (or the right thereof) loses entitlement to the aforementioned tax relief. Her Majesty’s Revenue & Customs’ default assumption is that a worker engaged via an umbrella employment intermediary is subject to SDC, so the onus is on the worker to demonstrate otherwise.

HMRC has not set out a rigid process or framework for the evidence that they would expect to see in order to overturn this default assumption, but they have made clear in their legislation guidance notes that simplistic signed waivers or generic statements suggesting a lack of SDC will not be taken as satisfactory evidence.

HMRC goes on to state that when they are testing a claim of a lack of SDC, that they will “test evidence by examining relevant documents and gathering facts from all parties involved, which include but are not limited to the workers, agency, client(s), managers etc.”.

So on the basis of this wording from HMRC, it would seem prudent that if you are attempting to make the claim that you lack SDC, you should offer up a range of supporting evidence that has the same sort of breadth and depth that HMRC will be looking for when/if they test your claim. In practical terms this would require communication and demonstrable agreement (at a contractual level) between you, your agency, your client, your payroll provider, and any other individuals or entities that also work on the client site (such as independent project managers etc.) that the manner in which you carry out your work is not subject to SDC by any party.   

The expert was Marc Scott, a director of umbrella company Liberty Bishop.

Editor’s Note: Related Reading –

Contractors, no need to be in a spin about expenses
Contractors’ Questions: Am I Supervised, Directed or Controlled?
Contractors’ Questions: Do I test for Supervision, Direction or Control?