The UK Government’s off-payroll working rules, originally due to be implemented in April 2020, have now been introduced. The rules are targeted at self-employed drivers with a single client who should be employed under a standard work contract.
As the UK Government’s own website explains, the off-payroll working rules are designed to ensure individuals working like employees but through their own limited company (often known as a ‘personal service company’ or ‘PSC’), or other intermediary, pay broadly the same Income Tax and National Insurance contributions (NICs) as individuals who are directly employed. These rules are commonly known as ‘IR35’.
The rules, which came into force yesterday, could affect some drivers operating in the UK.
According to Alastair Kendrick, the Road Haulage Association’s Road Transport Tax Consultant, drivers employed in 3 different ways need to take action as follows:
1) Self-employed drivers
For a driver to be considered self-employed HMRC would expect them to be undertaking the work in their own vehicle – so not driving your truck and having their own operator’s licence.
It is the case that if the driver uses your vehicle, is told what to do and when to do it then HMRC will not accept that the driver is self-employed. You will then be liable to meeting any underpaid income tax and National Insurance together with interest and penalties.
2) A driver engaged a personal service company
You need to be comfortable that the driver is operating via a UK limited company otherwise you will be liable for PAYE and National Insurance on payments made.
If the driver is operating via a UK limited company, then you will have to prepare for the tax changes in April. If you are a medium or large company (for tax purposes) then for payments after 6 April, you will need to determine whether the driver is liable on the terms of your agreement to IR35. HMRC has produced the ‘CEST’ tool on their website to enable you to determine the status of the driver.
If the result of the test is that IR35 applies you need to alert the driver and anyone in the supply chain, and then from 6 April 2021 operate PAYE and National Insurance on payments you make. If the test shows them to be outside of IR35 you can make the payment gross.
If you get the above process wrong then you will be liable to income tax, National Insurance, interest and penalties.
3) Drivers provided by Agencies
You need to be comfortable that the agency is UK registered. If not you are required to operate PAYE and National Insurance on payments you make. If they are UK registered the responsibility in regard to the driver sits with the agency and not you.