Claiming T&S expenses

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Despite what evidence your umbrella provides the HMRC will not accept this when determining SDC (supervision, direction or control) unless your agency and client has contributed to the evidence.

This is the new state of affairs as of April 6th 2016First a brief summary before we delve into the case for contractors who want to declare themselves outside SDC and as a result eligible for T&S (Travel and Subsistence) expenses.

HMRC published guidance for those affected by the T&S legislation (Employment Intermediaries: personal service, supervision, direction or control) which appears to be a blow for any payroll provider, worker or agency who had hoped that the SDC test would be relatively easy to pass via a straightforward “self-certification process”

Indeed, the guidance stipulates that HM Revenue & Customs will not “consider signed waivers and generic statements that the manner in which the worker personally provides the services is not subject to (or to a right of) SDC as satisfactory evidence.”

The guidance offered then goes on to be essentially a double blow to those who believed that, to shake of SDC with a signed waiver, there would only be the requirement of a dialogue between worker and the payroll provider.  It states that:  “Where it is considered that the legislation doesn’t apply because the test is not met and the HMRC are involved in an enquiry, we’ll 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.”

From these extracts from the tax authority it is evident that not only will a simplistic ‘due diligence’ process that essentially allows a worker to self-certify they lack SDC not stand up but that the HMRC’s approach will be one of ‘gathering facts from all parties involved’.   This strongly suggests that for a worker to successfully treated as lacking SDC evidence will have to be submitted by all parties in the contractual chain.

Therefore it seems that clients and agencies will not be able to distance themselves from the SDC issue, they cannot expect the worker and the employment intermediary to successfully establish a lack of SDC without them.  Clients and agencies of course are not obliged to become embroiled in SDC debates should they chose not to, however in practice they would need to have been involved for a ‘lack of SDC claim’ to successfully survive any challenge from HMRC.

The HMRC has been somewhat lacking in explaining what a genuine ‘due diligence’ process should look like, with no rigid framework stipulating the exact types of evidence that should be gathered.

Underlining the point that if it comes from a singular source all the evidence in the world will not suffice the HMRC says “gather facts from enquiries with persons involved in the arrangements, which include but aren’t limited to the workers, clients and the agency/intermediary.”

The Revenue’s attention it appears is that establishing a genuine lack of SDC is supposed to be a concerted effort on the part of all parties in the contractual chain and potentially other parties not directly linked in a linear fashion.  Essentially being outside SDC from April 6th 2016 is not something that can be established in an isolated manner.  You should have your agency and client on board if you plan to claim T&S expenses if you wish to declare a lack of SDC and suceed in the event of an investigatory challenge.

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