HRMC require all Sole Trader bookings to adequately assess if the working practices on the ground fall under Supervision, Direction and Control (SDC). Similar to IR35, which targets freelancers operating via a Personal Services Company, SDC's purpose is to assess the right tax compliance for the freelancer but in this case for those operating as a Sole Trader. Failure to do so could result in high penalties for freelancer and client.
As part our ongoing drive to build the most compliant platform for our client and freelancer community - one that protects all parties from HMRC liabilities and penalties - we are moving to the next phase of how we will process Sole Trader bookings.
The overall theme is to ensure areas of Supervision, Direction and Control are appropriately flagged and managed in accordance with HRMC's guidelines.
The process is in the form of five questions regarding the working practices on the ground for each client to answer when booking a sole trader. The questions will then be visible to the freelancer in order for them to accept the answers. If the five questions answered indicate there is no SDC risk, the booking will be released as soon as the freelancer accepts the assessment.
If the answers to the questions are inconclusive to determine SDC risk, a few additional questions will be asked in order for YJ to evaluate the booking and either release it, or give the freelancer the two options in order to proceed with the booking and be in line with HMRC's guidelines.
These two options are:
Register with an FCSA Umbrella Company.
Register as a Personal Services Company and handle your own tax obligations through this structure. Note that this structure would have to abide by IR35 rules rather than SDC.
Once a path is chosen and the business details are updated on a freelancer's profile, YJ is then able to release the booking for acceptance.