Supervision, Direction & Control (SDC) Assessment

Supervision, Direction & Control (SDC) Assessment

Feb 28, 2017

Contracting and IR35: How is ‘direction, supervision and control’ defined?

Whatever contract you’re working on, it’s important that you understand when and where the IR35 rules may apply. Part of the test for IR35 status involves the level of direction, supervision and control (SDC) involved in your work. In this article, our contractor accountant specialists look at the definition of SDC, helping you to understand the implications when considering current and future contractual opportunities.

Defining Supervision, Direction and Control

There is no legal definition of the meaning of SDC. The test against IR35 rules revolve around what, when, where and how work is carried out, and SDC relates specifically with the ‘how’ element.

    • Supervision

To be subject to supervision there must be someone overseeing you as you work. You are supervised if the person overseeing you is making sure you are doing the work, checking it is being done correctly and to the required standard.

    • Direction

You may be considered as being under direction if you are being made to perform tasks in a particular way, using guidance or instructions about how the work should be carried out.

    • Control

Control usually relates to there being another person who is able to dictate what work you do and how it is undertaken. If another person has authority to move you from one job to another this may also mean you are subject to control.

Importantly, you do not have to be subject to SDC to fall foul of IR35 rules. Your role will be considered subject to IR35 if another person has the ‘right of SDC’ over you, even if they don’t exercise that right. Also, you don’t have to be supervised, directed and controlled all at the same time – being subject to just one of the three will mean your contract is subject to IR35.

If you work in the health and social care sector, or education, these roles are governed by regulations which means they are subject to checks for compliance, so HMRC offer specific guidance for contracts in these sectors.

What is the impact of being subject to SDC?

IR35 identifies what HMRC calls ‘disguised employees’. As SDC is one of the key aspects of an IR35 test, it’s important to know your position.

HMRC says you must work out your employment status for each contract by considering what that relationship would be if there wasn’t an intermediary (such as a recruitment agency or your own Personal Service Company) involved. If your relationship would be considered as an employee, then IR35 applies to you and you would be required to pay tax and National Insurance in the same way as general employees, resulting in less take-home pay.

How to find out if you are subject to SDC

We appreciate the rules around IR35 can be confusing. If you need to clarify your personal circumstances, please do get in touch with a member of our expert team. An analysis of your contract and your working practice should be sufficient to determine whether you are subject to SDC.

We offer a free standard assessment to all contractors who work for our umbrella company, Umbrella Plus, or who use Crest Plus to administer their Personal Service Company. We also provide regular checks for all contractors to ensure ongoing compliance.

Get in touch today on 01244 684700 or use our online enquiry form.

You can find out more about IR35 here. HMRC’s website also contains useful further reading Supervision, Direction and Control.

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