The proposed reforms to off-payroll working in the private sector are causing many contractors to look at alternatives to limited company contracting, such as Umbrella employment.
The fact is that, with the exception of some temporary workplace expenditure for genuinely mobile workers, most expenses cannot be claimed when you’re an Umbrella worker and subject to supervision, direction and control (SDC).
It’s important to be aware of this when looking at how your financial position would change if you can no longer work through your PSC as a result of the off-payroll reforms, and is another reason not to close your PSC too soon.
Confusion has arisen around Umbrella expenses because the rules have changed. Because of this, and because each person will have different circumstances, it’s always best to take advice from specialist contractor accountants, such as ourselves.
However, when weighing up whether to switch from PSC to Umbrella, it’s best to assume that expenses cannot be claimed. Because of this, and because each person will have different circumstances, it’s always best to take advice from specialist contractor accountants, such as ourselves.
However, when weighing up whether to switch from PSC to Umbrella, it’s best to assume that expenses cannot be claimed. This is because of new legislation introduced in 2016 to disallow travel and subsistence (T&S) claims where a worker is subject to Supervision, Direction or Control (SDC), or a right thereof as to the manner in which the work is completed. Furthermore, it is the Umbrella company’s responsibility as the employer to evidence a lack of SDC, which is why most Umbrella companies do not allow expenses to be offset.
How is Supervision, Direction and Control defined by HMRC?
An important distinction is that any one of the three elements – supervision, direction OR control – can make a role subject to SDC. It’s not that all three must apply. A role that is subject to supervision, without direction or control, would be ‘caught’, just as much as a role that was subject to all three. Furthermore, SDC doesn’t necessarily need to be evidenced in practice for the role to be caught – if someone has a right to supervise, direct or control you , then SDC applies.
- Supervision – HMRC says supervision is applicable if a person checks or has the right to check the work that the worker is doing to make sure it meets a required standard. Supervision can also involve helping the person to develop their skills and knowledge.
- Direction – Direction is someone making a worker do their work in a certain way by providing them with instructions, guidance or advice as to how the work must be done. Someone providing direction will often coordinate how the work is done, as it is being undertaken.
- Control – This is where someone has control over the manner in which someone works. It includes having the right to move the person from one job to another.
What to do next
We provide unlimited support on compliance matters to all of our clients, so if you have any questions or concerns about Umbrella working and expenses, or the new off-payroll reforms and how they might affect your current role, please get in touch for expert advice and guidance.