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How Changes to Tax Legislation IR35 affect Transport Companies & Drivers
IR35 is tax legislation relating to off-payroll working. The changes affect both transport companies who use self-employed drivers, and drivers who claim to be self-employed. Even if you are a transport company who uses an agency to contract drivers, if the driver is deemed to be under your control the changes affect you.
The reasoning for these changes to IR35 is some drivers claim to be self-employed in order to enjoy tax benefits. This is only a problem if the driver is, in fact, working under the control of the transport company, and treated just as if they are an employee of the transport company. For a driver to be properly classified as self-employed they should have a degree of autonomy in their work schedule, be able to send a replacement driver if they are unavailable, and accept financial risk. Employers can use HMRC’s CEST tool to help understand how they should classify their workers (https://www.gov.uk/guidance/check-employment-status-for-tax). This is a useful tool but it may not be advisable to fully rely on.
If a self-employed driver is wrongly claiming to be self-employed, the changes to IR35 mean they will have to pay similar tax and national insurance contributions as employees. The transport companies that employ such self-employed drivers do not escape liability either as HMRC will ‘work up the chain’ to claim tax that is owed, and there is no time-limit for HMRC to claim tax that is owed.
When does it come into effect?
The changes were originally planned to come into effect on the 6th April 2020 but due to COVID-19, the date has been temporarily deferred to 6th April 2021.
Actions transport companies should take
View of the Traffic Commissioner
In response to HMRC guidance, Traffic Commissioners have taken an interest in the working arrangements of operator licence holders and where the arrangements contravene the off-payroll working rules of IR35, this can be an issue of Repute. Traffic Commissioners could also refer such cases to HMRC, which could result in financial penalties.
The Traffic Commissioner view is it would be ‘rare’ in road haulage to be classed as self-employed unless the driver is an owner-driver.
The reasoning for these changes to IR35 is some drivers claim to be self-employed in order to enjoy tax benefits. This is only a problem if the driver is, in fact, working under the control of the transport company, and treated just as if they are an employee of the transport company. For a driver to be properly classified as self-employed they should have a degree of autonomy in their work schedule, be able to send a replacement driver if they are unavailable, and accept financial risk. Employers can use HMRC’s CEST tool to help understand how they should classify their workers (https://www.gov.uk/guidance/check-employment-status-for-tax). This is a useful tool but it may not be advisable to fully rely on.
If a self-employed driver is wrongly claiming to be self-employed, the changes to IR35 mean they will have to pay similar tax and national insurance contributions as employees. The transport companies that employ such self-employed drivers do not escape liability either as HMRC will ‘work up the chain’ to claim tax that is owed, and there is no time-limit for HMRC to claim tax that is owed.
When does it come into effect?
The changes were originally planned to come into effect on the 6th April 2020 but due to COVID-19, the date has been temporarily deferred to 6th April 2021.
Actions transport companies should take
- Look at your current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through personal service companies.
- Determine if the off-payroll rules apply for any contracts that will extend beyond April 2021.
- Start talking to your contractors about whether the off-payroll rules apply to their role.
- Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.
View of the Traffic Commissioner
In response to HMRC guidance, Traffic Commissioners have taken an interest in the working arrangements of operator licence holders and where the arrangements contravene the off-payroll working rules of IR35, this can be an issue of Repute. Traffic Commissioners could also refer such cases to HMRC, which could result in financial penalties.
The Traffic Commissioner view is it would be ‘rare’ in road haulage to be classed as self-employed unless the driver is an owner-driver.
In November 2019, we launched this innovative offering for clients seeking access to advice for an agreed annual fee.
This is an alternative to our standard retainer system and offers clients an opportunity to obtain advice where the cost is pre-determined for the whole year. This arrangement would suit clients who may from time to time need to seek legal advice but may hold off preferring a ‘wait and see’ approach.
In our experience, early intervention can reduce the risk of the situation escalating as we can give advice and guidance that nips regulatory issues in the bud before they develop into something far worse. We also strongly recommend our clients consider taking out legal expenses insurance to cover investigations and prosecutions brought by regulators.
DyneProtect© has teamed up with Butcher & Barlow solicitors to provide DyneProtect© clients access to a specialist team of corporate and commercial lawyers for up to 1 hours’ worth of free telephone advice/legal consultation.
Butcher & Barlow have a dedicated commercial and agricultural hub on Gadbrook Park in Northwich which provides advice and assistance to a host of business clients in specialist areas such as Corporate and Commercial Law, Commercial Property, Private Client and Agriculture.
If you have a corporate or commercial issue which Dyne Solicitors is unable to handle, then Butcher & Barlow’s Commercial team will certainly be able to step in and assist.
DyneProtect© has also negotiated price reductions on OLAT / Driver CPC courses run by training providers KP Legal Limited who are offering discounts to DyneProtect© clients on Operator Licensing Awareness / Compliance training (-20%) and Periodic Driver CPC training (-10%).
This is an alternative to our standard retainer system and offers clients an opportunity to obtain advice where the cost is pre-determined for the whole year. This arrangement would suit clients who may from time to time need to seek legal advice but may hold off preferring a ‘wait and see’ approach.
In our experience, early intervention can reduce the risk of the situation escalating as we can give advice and guidance that nips regulatory issues in the bud before they develop into something far worse. We also strongly recommend our clients consider taking out legal expenses insurance to cover investigations and prosecutions brought by regulators.
DyneProtect© has teamed up with Butcher & Barlow solicitors to provide DyneProtect© clients access to a specialist team of corporate and commercial lawyers for up to 1 hours’ worth of free telephone advice/legal consultation.
Butcher & Barlow have a dedicated commercial and agricultural hub on Gadbrook Park in Northwich which provides advice and assistance to a host of business clients in specialist areas such as Corporate and Commercial Law, Commercial Property, Private Client and Agriculture.
If you have a corporate or commercial issue which Dyne Solicitors is unable to handle, then Butcher & Barlow’s Commercial team will certainly be able to step in and assist.
DyneProtect© has also negotiated price reductions on OLAT / Driver CPC courses run by training providers KP Legal Limited who are offering discounts to DyneProtect© clients on Operator Licensing Awareness / Compliance training (-20%) and Periodic Driver CPC training (-10%).
