Employers using agency drivers with self-employed status or who are hired through ‘umbrella’ companies have been warned by HM Revenue & Customs that they may well be breaking the rules, and could face substantial penalties.
In correspondence between HMRC and the Road Haulage Association seen by Transport Operator, Mark Frampton, of the HMRC’s employment status policy department, warned that: “Haulage companies and workers are being sold schemes that are very aggressive and they may not be told about tax (includes national insurance contributions) legislation that catches these schemes. This can lead to arrears of tax, interest and penalties.”
He continued: “In road haulage, it is rare for someone to be genuinely self-employed unless they are an owner-driver.
“Whether someone is employed or self-employed, is not a matter of choice but is determined by the particular terms and conditions under which a person works.
“Broadly, someone is self-employed if they are in business on their own account and bear the responsibility for the success or failure of that business. They will be employed if they personally work under the control of their engager, and do not run the risks of having a business themselves…
“We are finding evidence that haulage companies are sold the idea that they can set up, or have an agent set up companies for their workers and avoid tax.
“The companies and the workers appear to be unaware that there is legislation that may apply and allows HMRC to pursue workers, agents and the companies themselves. They could face investigation and significant tax bills. We think some companies are told, wrongly, that anti-avoidance legislation does not apply.
“In some cases, we think that the arrangements go further than simply avoidance and evasion can be involved.”
The letter hints that action may already have been taken against some operators and their drivers.
“It is unfair that operators are being undercut by those who are not paying the right tax and we have been successfully targeting these schemes. Of course, a lot of our work is in private so you may not have heard about it.”
HMRC does allow self-employed status for owner-drivers who work mainly for one haulage company (tipper and mixer ‘franchised hauliers’ for example), but only in certain circumstances. The owner-driver has to demonstrate a degree of control over the vehicle’s use, and, for example, must be entitled to provide another driver as a substitute for himself if he wishes.
According to HMRC’s internal employment status manual, where the vehicle is leased from the same concern that the driver is working for, HMRC will examine the terms of the lease; and the following conditions are likely to be required to be met in order for a driver to be established as self-employed:
1) The lessee has total control of, and responsibility for, the vehicle for the duration of the lease
2) The lessee is responsible for the vehicle’s maintenance, insurance, and fuel
3) A ‘commercial rent’ is paid protecting the investment of the lessor
4) The driver is legally responsible for obtaining an operator’s licence for the vehicle
An arrangement which allows the haulier to retain control and responsibility for the vehicle, enabling it to be used by other drivers; where the vehicle is maintained, fueled and insured by the haulier; or where the vehicle is ‘paid for’ by a deduction from wages based on hours of use, mileage or a “clearly non-commercial” amount, is unlikely to establish self-employed status for the driver.
In a related development, four cycle couriers in London are currently seeking to be recognised as employees by the companies that they work for.
The four have taken their case to tribunal with the backing of the Independent Workers Union of Great Britain which has engaged Jason Galbraith-Marten QC to represent them, and say that because they are only allowed to work for one company and are monitored by it and required to carry its ID that they are, in fact, employees.
Employee status would entitle them to at least the minimum wage (they are currently paid between £2 and £3 per drop), sick pay, paid holidays and other benefits.
If the tribunal finds in their favour, it could have a dramatic impact on the up to 460,000 people estimated by Citizens Advice to be the subject of ‘bogus’ self-employment in the UK.