Although the Supervision, Direction or Control (SDC) rules, which govern the eligibility of travel and subsistence expenses, have existed for nearly two months, IT contractors and recruiters are still not sure about them.
The SDC rules came into effect on 6th April, but many contractors and recruitment agencies are unaware of their liability and are approaching law firms to get answers to their queries. Contractors still do not know what measures they should take to avoid falling foul of the new rules, which include a provision for debt transfer.
Recruitment agencies are being informed by law firms that they have no reason not to assist contractors to get evidence from the end hirer to show whether the contractor comes under the purview of SDC rules.
However, some law firms believe this will not be viewed favourably by end hirers. Theresa Mimnagh from Lawspeed, a UK-based legal consultancy, stated that an agency can request the end hirer to give a statement regarding an IT contractor’s status. However, under such circumstances, a hirer can get involved in tax investigation if HMRC feels that the contractor has been avoiding tax payments.
Mimnagh said that if the SDC statement is incorrect, HMRC can pursue the end hirer, and this will have an adverse effect on the relationship between the hirer and agency. She also stated that most end hirers will be able to provide documentary evidence of just simple waivers and generic statements, and HMRC has already made it clear that it will not accept this type of evidence to prove that a contractor does not fall under the purview of SDC.
Currently, end hirers are changing contract terms and conditions to stay on the right side of SDC rules. However, Mimnagh stated that such a move is not without risks. Hence, contractors, including IT contractors, recruitment agencies, and hirers, should first get a thorough understanding of SDC before taking any step.