Operators warned to check IR35 changes

23 January 2020

A leading law firm has reminded transport operators that they may be caught by tax changes due to come into effect in April 2020 if they engage drivers through their own personal service companies directly or through an agency.

With effect from 6 April 2020, HM Revenue and Customs (HMRC) has said that the rules in the public sector known as IR35 will apply to medium and large businesses in the private sector.

“Crucially,” Ashtons Legal said, “this will mean that where you engage a driver under an arrangement such as a private service company you may be deemed to be the employer of that driver and liable to deduct the relevant income tax and National Insurance (NI).”

It is advising operators to review their existing arrangements to identify which drivers are affected and to check their employment status — are they are they employees, workers or self-employed?

Companies should notify those affected as to their determination of the status and be prepared to make tax and NI adjustments.

Their category dictates their employment rights — which they may wish to invoke in the event of a dispute or if they leave the company. The true status of a driver, the law firm points out, is what the reality of the arrangements are as a matter of law and fact.

“Remember also that, where your business holds an operator’s licence, the Traffic Commissioner expects that you fulfil your HMRC obligations and you do not avoid tax and NI either via private service company arrangements or by categorising drivers as self-employed when this is not the case, Ashton Legal concluded. “Your good repute as an operator — a fundamental requirement — can potentially come into question here.”

The Government has decided to launch a review of changes to the rules with full details available at www.gov.uk/government/consultations/draft-secondary-legislation-off-payroll-working-rules-from-april-2020 and a deadline for comments of 19 February 2020.

Note:

The Government makes it clear that it is consulting on the technical details of the proposed legislation: it is not seeking views on whether the new rules should be introduced. These will happen on 6 April.