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If you work through a personal service company (your own limited company), then you need to understand the rules around Supervision, Direction, or Control (SDC) to see if you can claim travel and subsistence expenses during your contract.
Before we get to exactly what this means, let’s explain why this matters.
The Finance Act 2016 introduced measures to create a ‘level playing field’ between permanent workers who cannot claim tax relief on travel and subsistence expenses, and those freelancers and contractors who could.
There are three main groups of workers affected by these measures:
If you fall into any of these categories, you may not be able to claim tax relief on travel and subsistence expenses. For those still unsure whether they’re affected, you can use the Supervision, Direction, and Control (SDC) test to get a clearer picture.
The SDC test is broken into three sections, as the name suggests. A worker will need to show that they’re not under the supervision, direction or control of the client they’re working for if they want to claim tax relief on their travel and subsistence expenses. Let’s break them down:
There are two main ways for HMRC to apply the SDC test:
HMRC has outlined some typical examples and scenarios under the expenses legislation to help contractors understand the rules a little more.
If you’re in any doubt over your SDC status, you can contact your umbrella company or agency for some clarification. If you have your own limited company, please speak to an accountant.