Contractors' Questions: Am I Supervised, Directed or Controlled?

Contractor’s Question: I’m unsure as to whether ‘Supervision, Direction or Control’ will apply to me from April 6th, for the purpose of claiming Travel and Subsistence expenses.

I work as a contractor through my limited company on both a contract and non-contract basis. My contract work is fixed-term through an agency but my other work is a job-by-job basis.

Secondly, I do not operate IR35 with my contract. Actually, I think I am opted out of IR35 with my contract and my agency. Therefore, the way I read it, ‘SDC’ shouldn't apply and I should still be able to claim expenses from April 6th; am I right?

Expert’s Answer: The answer is relatively straightforward. If you are trading through your own limited company and your assignment (contract) is outside IR35, you can continue to claim tax relief on the legitimate business expenses, such as T&S, that you incur. 

However I would like to address a couple of other points. Firstly, there is a myth that an 'IR35 friendly' contract allows a contractor to operate an assignment outside IR35 - that is simply not the case. The reality is that the underlying test for IR35 lies in the actual working practices, not in the terms of the contract.

This is similar, in principle, to the underlying test for SDC where the assessment is not made on the words in the contract but on the actual working practices. It is as a result that we are seeing evidence-based processes being introduced to test for SDC.

These processes are seeking to establish on each assignment (a) If the worker decides how the work is done? (b) If the worker can be told what to do (as to the manner)? (c) If the worker can be moved depending on priorities? and (d) If the worker decides when the work is done? These criteria are very similar to IR35 although, unlike the Intermediaries legislation, they do not test for ‘financial risk.’ 

Secondly, the language you use in posing your question implies some misunderstanding; specifically "I am opted out of IR35 with my contract and my agency." I suspect that you have confused several pieces of legislation that may, or may not apply to you. The reality is that IR35 either applies to your assignment or it doesn't - you can't opt out. You can, of course, opt out of the EU Working Time Directive which seeks to limit the hours you can work each week to 48 hours. You can also opt out of the Conduct of Employment Agencies Regulations which seek to give you certain rights.    

The expert was Julia Kermode, the chief executive of the Freelancer and Contractor Services Association (FCSA).

Editor's Note: Further Reading on 'SDC' -

Contractors' Questions: Will 'SDC' catch my client trip?

Why it's all change for umbrellas from April

How the curb on contractor expenses might play out

Tuesday 5th Apr 2016
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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