Operators planning to hire self-employed drivers following Chancellor Kwasi Kwarteng’s promise to repeal changes to the IR35 off-payroll working rules by next April could still risk the ire of the Transport Commissioner and HMRC.
The warning comes from Kieran Smith, chief executive of driver agency Driver Require. It follows changes announced in Kwarteng’s controversial mini-budget statement, which will once again allow self-employed drivers, operating as personal service companies (PSC) or as limited companies, to manage their tax and NIC affairs and determine whether they are genuinely self-employed, transferring that responsibility away from the haulier or end client.
The government aims to introduce the changes by 6 April 2023. However Smith warns hauliers against rushing to reinstate the use of self-employed drivers since the changes could be delayed by the Parliamentary process which requires the changes to be debated and voted on by both Houses.
“This opens it up to substantial risk of challenge, rejection and/or demand for replacement measures and legislation,” said Smith.
Operators with drivers who are planning to switch to a self-employed status, without any major changes to the way they work, should also beware, Smith warned.
He explained: “All companies were legally obliged to produce Status Determination Statements (SDS) for each of their worker categories and they will have made committed statements that their workers fall within or outside the scope of the IR35 regulations.
“Unless the working practices and contractual arrangements with these workers are changed substantially, it will be difficult to argue that it is legally reasonable to change their employment status just because the liability has been transferred.”
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With companies still liable under the Criminal Finances Act 2017, “HMRC will be able to apply this much more easily on the basis of the published and authorised SDS forms,” Smith cautioned.
Hauliers also need to bear in mind guidance issued in 2019 by Richard Turfitt, the Senior Transport Commissioner, which states that “in road haulage, it is rare for someone to be genuinely self-employed (a limted company contractor) unless they are an owner-driver”.
The guidance was referred to in the Bridgestep public inquiry (UT/2019/54) in July 2019, setting a precedent for future cases. The inquiry established that using a self-employed driver to cut costs did not exempt Bridgestep from being liable for the costs incurred by the self-employed driver damaging a railway bridge.
The case resulted in the transport manager losing his repute and being disqualified until he had undergone a refresher course. In addition the operator lost its repute and operator licence and the company and its director were given a formal warning.
Smith said: “The long and short of it is that, if an operator suffers an incident that brings them in front of the Traffic Commissioner, the employment status of their drivers will be an important consideration of the judgement process.
“If the operator has engaged drivers on a PSC (limited company) basis, whether permanent or agency, for the purposes of reducing staffing costs, this will lead to a loss of repute and contravention of the Senior Traffic Commissioner’s employment guidance, which will likely result in a harsher judgement and increase the risk of revocation of their O licence and/or disqualification of the transport manager.”
Smith added: “Hence, even if the IR35 reforms are repealed and the financial liability for payment of correct taxes passes from the haulier back to the PSC driver, it is still not advisable for an operator to engage PSC drivers due to the risk of harsher judgements from a hearing with the Traffic Commissioner, nor are they likely to welcome being pursued by HMRC under the Criminal Finances Act.”
