RHA highlights impact of employment tax fraud
The Road Haulage Association (RHA) has warned that fraud involving the tax status of lorry drivers is becoming a serious concern for the industry, with drivers increasingly paid as if they were self-employed, rather than through pay-as-you-earn (PAYE).
If the driver owns the truck he is driving then the self-employment route is likely to be legitimate, says the RHA – but adds that, if the vehicle belongs to someone else, PAYE is the correct means of payment, regardless of where the money is coming from.
The association said two possible caveats could apply: firstly, “where there is genuine substitution contract in place, which would have to be demonstrated and which seems highly unlikely”; and secondly, “where the company paying the driver has a local agreement with HMRC – which again seems extremely unlikely, given HMRC’s rules. These points have been discussed and agreed with HMRC.”
The association claimed: “Dodging the correct tax code means that the employer evades income tax and national insurance and also a raft of drivers’ rights under employment law. This gives an unfair advantage over firms that work within the law.”
Chief executive Richard Burnett said that, in the context of the driver shortage, law-abiding hauliers were losing drivers and work to those not playing by the rules.
“The practice is also damaging to law-abiding driver agencies that are losing drivers to less reputable competitors,” he added. “Incorrect tax status is not a new issue but it has become a much more serious concern this year.
Possible reasons cited by the RHA for the increase in fraud include corner-cutting, as well as firms being given poor advice.
“It is clear that a growing number of drivers think they can set up a business and charge a higher net rate by evading their due tax,” said the association.
“Scams are rife among drivers who come to the UK from Eastern Europe for a limited period; but the fraud is far from limited to these drivers.”
Richard Burnett continued: “Our concerns are for the health of the UK haulage sector. It is coming under increasing pressure to break the rules and hauliers who may inadvertently be paying drivers off payroll may face a heavy claim for back tax and penalties of up to 70 per cent of the tax and NI arising.
“Also, individual drivers could face bankruptcy if they evade tax payments and then HMRC enforces its rules.”
The RHA said that HMRC agreed its interpretation of the rules is correct, and added that the Treasury is being defrauded of substantial tax revenues just as the chancellor has said he wants to improve tax compliance.
“The growing illegality is of real concern to our members who all want fair competition. This should be of concern to ministers and we look forward to effective enforcement action,” Burnett concluded.
