A contractor providing their services via an employment intermediary is deemed to be under supervision, direction or control (SDC) when the end-user client directs the manner in which they provide those services – i.e. the end-user/client tells the contractor how to perform their duties.
From April 2016, contractors who fall under the supervision, direction and control of their end-user client are not entitled to claim tax-free expenses (including mileage), unless:
They provide their services from more than one workplace within the same assignment. If so, they are able to claim mileage from home to the secondary workplaces; or between workplaces if they travel to more than one during the same day.
Our range of products provide options whether your contractors fall under the supervision, direction and control of the end-user, or not.
Temporary contractors providing their services via an employment intermediary, such as a recruitment agency, are unable to claim tax-free expenses (including mileage where they are travelling to a single site for the entire duration of their engagement), unless:
Contractors who provide their services via an employment intermediary are presumed to be under the supervision, direction or control of the end-user unless proved otherwise. Therefore, the agency and the end-user will need to demonstrate that SDC is not present on an assignment. Due diligence and scrutiny of each and every assignment contract will be required.
However, it is unlikely that HMRC will police SDC compliance by inspecting individual contracts within individual agencies. Instead, its focus will be on businesses like Payme which will be inspected regularly, no doubt, to check compliance with the new (and ongoing) regulations. It is our responsibility therefore to maintain robust and compliant processes and procedures. This also means that all risk lies with us. So your business is protected. Plus, if you want to audit us as part of your due diligence, we are happy to facilitate that.
HMRC’s starting point is that all contractors providing their services via an employment intermediary are under the supervision, direction or control of the end-user.
To demonstrate that they’re not, you’ll need to establish whether the end-user client (this could also be a manager or foreman) tells the contractor what to do and how to do it. This might include overseeing how the work is done, controlling when it is done and moving the contractor around the site as the client chooses.
If you need help determining whether your contractors fall under SDC, get in touch. Our SDC check has been developed in conjunction with the UK’s leading tax and employment law advisory bodies and is a robust mechanism for assessing SDC. Call us now on 0333 200 0845.
Salary sacrifice is when employees receive non-taxable expense reimbursements instead of taxable salary. The new salary sacrifice rules mean pay cannot be varied by reference to the value of expenses. Authorised Mileage Allowance Payments (AMAPs) fall outside of these rules and can be paid tax-free instead of salary as part of a weekly pay calculation.
Changes to legislation made in April 2016 affect when relief can be given for expenses incurred. The ability for contractors to vary their weekly salary depending on the amount of expenses claimed has been removed for most expenses, although contractors who are eligible to claim tax-free expenses can claim them annually via their self-assessment tax return – which we can do on their behalf.
This legislation does not affect Authorised Mileage Allowance Payments (AMAPs) – i.e. the 45p per mile claims that are paid to operatives when they use their own car for business travelling.
Limited co/PSC contractors working in the public sector are now subject to new rules (known as Off-payroll working in the public sector) whereby their agency or end-user will be charged with determining their IR35 status. If the contractor is deemed to be caught by IR35 the agency or end-user would be responsible for applying the deduction of PAYE tax and National Insurance (employers and employees) contributions and RTI submissions.
PSC contractors are also no longer be able to deduct the IR35 5% tax‐free allowance, which was intended to reflect the costs of managing IR35.
Agencies need to be aware of those clients that are public sector bodies, or that subcontract to public sector bodies in order to determine the IR35 status of contractors working for them. A list of public sector organisations can be found here (Annex B).
To help contractors working in the public sector determine whether they fall under IR35 rules, HMRC is developing the Employment Status Service (ESS). This online tool will calculate a contractor’s status based on their responses to a series of questions.
While it is only PSC contractors working for public sector clients who are affected by new IR35 rules, those in the private sector can’t afford to relax. When it comes to IR35, everyone needs to ensure their house is in order.
Our products and processes have been carefully designed under the supervision of the UK’s leading tax and employment law advisory bodies. Our systems and procedures have been and will continue to be audited by HMRC.
From April 2017, businesses with limited costs (i.e. businesses who provide a service, such as contractor limited co/PSCs) will face a new flat rate of VAT of 16.5%.
An online tool has been developed by the HMRC to enable businesses to calculate the levels of VAT they are required to pay, based on the costs they incur.