How will Supervision Direction or Control rules affect Contractors


From 6th April HMRC are introducing new legislation relating to the way contractor status will be determined and ultimately how they will be paid. While this is only one of a new wave of measures to tackle avoidance within the contracting industry, we must highlight that HMRC does not always get things right (Take IR35 for instance), but whatever it does, right or wrong, has far reaching consequences.

As with all HMRC led initiatives things are not straightforward, so we will explain in detail.

From 6th April a contractor will only be able to claim travel (including subsistence) if the contract assignment they are working on falls outside of Supervision Direction or control. This is regardless of how the worker has structured him or herself.

HMRC have stressed that they are only focusing SDC on the method of how the work is undertaken, not when and where, so a worker who is told where to undertake the work and at what time will NOT be under SDC for these purposes should he/she be able to determine how the work is then undertaken.

A good example is an IT developer requested to visit the client site at 9 and leave at 6, being told what software platform to develop on. However, upon arrival at the site the developer receives instruction to design and implement a new piece of software to give a certain result.

The worker goes off and starts working autonomously in creating this software, stopping now and again to check in with a progress report for the client. The developer, being regarded as an expert, is therefore able to undertake the actual work as he or she sees fit.

In this scenario, the worker would be able to convince HMRC that while there is direction and control, there is no SDC in relation to how the work is undertaken.

While this example is a simple one to determine, others may well be complicated because HMRC has suggested that SDC can be “implied” so even if in practice SDC doesn’t happen but the client has the right to exercise SDC then the status would fail in this regard.

HMRC’s guidance notes can be found on the following link:


Under this new legislation, HMRC has also created “personal liability” for the directors of the company employing the worker, so either the directors of the umbrella company or the actual worker of a Personal Service Company (PSC).

So unlike IR35, where getting it wrong may cost you the company, the worker usually walks away with no financial penalty, getting this wrong has significant financial penalties.

Assessment of SDC

Instead of keeping things simple and having one test for all, HMRC decided that workers with a Personal Service Company could use IR35 to determine their SDC status. If the assignment falls within IR35 then no tax relief on travel expenses to the site will be claimable.

With an umbrella worker, the umbrella company now needs to undertake an assessment of the working assignment, which is often difficult due to the lack of contractual arrangements with the actual end hirer. Therefore, the umbrella will rely on the workers to undertake this assessment on our behalf.

Either way the umbrella company needs to gather information to determine the SDC status to ensure the correct tax relief is given.

Small Print

As with all new legislation the devil is in the detail and with no test cases to rely upon compliance activity needs to remain high until clarity becomes available based on fact rather than opinion.

We have listed below some definitions to help with the understanding:

Excluded services:

1. Where a worker provides his services wholly in the client’s home.

2. Multi-site assignments – such as District Nurses – travel from home to the hospital is not claimable, however, travel throughout the day to various patients is claimable except the journey from the last appointment back home.


Travel and subsistence includes accommodation, mileage, actual travel costs, such as bus or train fairs and food and drink. However, travel does not include incidental costs.

Source: Jasmin Swayne, Atlantic Umbrella

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