IR35 Tax Change (Self Employed Drivers) – How Does This Affect Transport Companies?
For a number of years, HMRC has taken an interest in the arrangements between transport companies and drivers who hold themselves out to be self employed. In many cases, this has been seen to simply be an arrangement to reduce tax and National Insurance liabilities and the arrangements are that of employer and employee. Usually, a self employed driver will be the only person in the company providing the service and on the face of it, works in exactly the same way as a driver engaged under a contract of employment.
Following HMRC guidance, Traffic Commissioners have taken to scrutinising workers arrangements for businesses holding an Operator’s Licence and will consider this a matter of Repute, if the company has failed to properly categorise and pay its workers.
The new IR35 tax change will force all businesses to review any off payroll worker arrangements. If the categorisation is incorrect, the employee will be liable to back pay any National Insurance and Income Tax contributions, even where the initial agreement was on a self-employed basis. There is no time limit on the for HMRC to review previous years and order tax payments.
Under current HMRC guidance, it is only in very limited circumstances that a driver will be truly self employed. Where a company is instructing the driver as to the tasks and daily schedule, providing a vehicle, insurance and fuel costs, it will usually be deemed that the driver is an employee. A self employed worker should be given an element of autonomy in their working day and be able to substitute their attendance for another. They should also be responsible to bear any costs of service and the risk element, for example where a journey is much longer than anticipated, their fee should not change.
HMRC has introduced the CEST tool, to help employers to categorise their workers. This has been criticised by some as it can be manipulated with self-serving answers to generic questions and will only give an indication. Employers cannot use this tool as a firm determinative assessment to rely upon.
If you require advice on IR35, you should take advice from your accountant or visit the government website https://www.gov.uk/topic/business-tax/ir35