Supervision, Direction or Control
‘Supervision, direction or control’ is already used to filter out false self-employment, but the reality of this affecting contractors expenses from April 2016, alongside talks that it could be a way to reform IR35 makes it a topic at the forefront of the contractor sector. But what does this really mean and how do these changes affect contractors?
To fall outside of IR35 a contractor must be able to show that they do not work under supervision, direction or control and are genuinely in business on their own account.
Being one of the four fundamentals of what, when, where and how work is carried out to determine employment status, SDC falls comfortably within the fourth fundamental of the control test – HOW. Are you, as a contractor, supervised, directed or controlled in how you carry out your work?
But what does HMRC mean by Supervision, Direction and Control?
Supervision (S)
If you as a contractor have someone overseeing you whilst working, ensuring you are completing the requirements of the role to the required standards, then you are being supervised. This would also be the case if the person is assisting you in developing your knowledge and skills of the role.
Direction (D)
For a contractor to be under direction, then there must be an individual making you work in a certain way, through instructions, guidelines or advice, directing or co-ordinating you on how the work must be undertaken.
Control (C)
If someone is dictating what work you are required to undertake and how you undertake a brief as a contractor you are subject to control. This is also the case if someone has the power to move you from job to job.
The above are just the beginning of the control test that HMRC undertake, with a further 3 ways that makes the SDC test even harder to pass.
1- Any person (not just the end user) can place SDC on you the contractor for you to fail the test, be it the agency, end client.
2 – If persons have the right to exercise supervision, direction and control over you, even if it is not being exercised you can fail the test
3 – If you fall under just one of the following Supervision or Direction or Control then you fail test.
If you fail any element of the test it is seen that you are not of self-employed status.
HMRC have claimed that “Where there are procedures, methods and instructions which must be followed, it is likely there will be SDC over the manner in which the services are provided.”
With all the above, it is proving even harder to ascertain if you as a contractor, really are self-employed but as long as you qualify as falling outside of any supervision, direction, or, control (or right of) then you should pass the test and be able to continue to accept contracts as truly self-employed.