SDC Test (Supervision, Direction, Control) for IR35 Explained | AccountingStack

The Supervision, Direction, and Control (SDC) test is one of the three primary tests used to determine IR35 status. It examines whether the end client controls how, when, and where you carry out your work. A high level of control points towards employment and therefore inside IR35; genuine autonomy in how you deliver your work points outside IR35.

What do supervision, direction, and control actually mean?

Supervision

Supervision is the oversight of how work is carried out. It is more than simply checking the final result; it involves monitoring the method and quality of work in progress. An employer typically supervises employees; a client of a contractor checks the output, not the process.

Indicators of supervision (risk of inside IR35):

• A named manager checks your work on a daily or weekly basis
• You must seek approval before adopting a new approach
• Your work is reviewed against specified procedures before delivery

Direction

Direction means the client dictates how you must carry out the work, rather than simply specifying the outcome. Being told what to deliver is consistent with contracting; being told precisely how to deliver it suggests employment.

Indicators of direction (risk of inside IR35):

• You are told to follow specific internal processes or methodologies that you had no part in creating
• You are required to attend daily stand-ups or sprint planning as a team member
• The client specifies your tools, technology stack, or working methods

Control

Control in the SDC context refers to control over where and when you work, as well as how. Full control by the client over your working hours and location is an indicator of employment.

Indicators of control (risk of inside IR35):

• You are required to work set hours or be available during set times
• You must work exclusively on-site at the client's premises
• You cannot work for other clients without the client's permission

How HMRC applies the SDC test

HMRC considers the SDC test holistically, looking at the overall picture of the working relationship rather than isolating individual factors. A contractor who has some degree of direction (as most do when working within a client's existing systems) but who retains genuine autonomy in how they deliver results is likely to be outside IR35 on this test alone.

Gathering evidence of limited SDC

• Emails or messages showing you proposed and implemented your own working approach
• Contracts specifying delivery of outcomes rather than directed working methods
• Timesheets showing variable hours or working from your own location
• Evidence of working for multiple clients simultaneously
• Your own equipment used for delivery

SDC in the umbrella context

The SDC test also has specific relevance for umbrella company workers. Under HMRC rules introduced in 2016, umbrella company workers cannot claim travel and subsistence expenses if they are subject to SDC in their engagement. If you work through an umbrella and the client exercises SDC, you cannot offset travel costs against your income.