Label contractors 'unsupervised' at your peril, recruiters warned

A contractor jobs agency is under attack for advising its clients to label temporary staff as ‘unsupervised,’ in a bid to bypass the block on expenses for ‘supervised’ workers.

Advising hirers in such a way is wrong, damaging to relations and risky for both those giving the advice and those in receipt of it, condemned Michelle Reilly of compliance firm CXC Global.

Reilly issued the alert in wake of Unite, a union, leaking a presentation by the agency outlining to clients “The Solution” to the block on expenses for Supervised, Directed or Controlled workers.

The agency says expenses can still attract tax relief “providing there is a process in place [on-site] which determines a contractor’s ability to work without SDC,” the presentation to clients says.

Obtained by the Guardian newspaper, the presentation goes on to claim that ‘The Solution’ has been “devised and approved with expert tax and legal advice…from a leading specialist QC”.  

Reilly is unimpressed: “It’s simply wrong to advise businesses and professionals not to operate under SDC. The classification is [solely] down to HMRC’s interpretation”.

She added that agencies which advise clients to label contractors ‘unsupervised’ put their board directors at risk, as they can be held personally liable under the T&S legislation.

“Nothing ruins a business relationship like a huge fine for the wrongdoing of one of your suppliers,” the CXC boss said, referring to potential penalties from HMRC.

“However, the government must also take some of the blame for agencies adopting this approach…[as] they’re certainly not clear about how to test for SDC, which leads to situations like this where agencies are essentially making up their own rules.”

Her comments follow concern by some agencies about how contractors can be helped to offset the loss of T&S expenses, in light of hirers refusing to set higher rates as a reimbursement.