Drivers caught inside IR35 rules

LOGISTICS, DISTRIBUTION, warehouse and haulage businesses remain confused by the off-payroll IR35 working rules that changed in April last year, but it’s clear more drivers will have to pay more tax to avoid breaking the rules, as David McCormack, CEO of outsourced payroll specialists HIVE360, explains.

Businesses are still very confused by the off-payroll IR35 working rules that changed in 2021 to now include private as well as public sector organisations, and also how some individuals pay tax.

Since April 2021, drivers and the organisations hiring them, have had to determine their employment status. The evidence is clear – many driver classifications fall ‘inside of IR35’ and have to pay PAYE.

More and more businesses and the recruitment agencies supplying drivers and other workers, are coming to us for help, both to understand the rules, and to make changes to their payroll systems to ensure their company is compliant. Failure to do so means they risk a huge fine. 

The first step is to help them determine if their drivers fall inside of IR35, and then to develop a PAYE payroll solution by using our IR35 compliant service and expertise.

HMRC guidance

HMRC made changes to its employment status manual around the time of the Spring 2021 Budget, but some employers simply missed this important move. 

The updates make HMRC’s  opinion on the status of drivers clear: IR35 applies to all transport providers and commercial vehicles, from hauliers and lorries, drivers of commercial vehicles carrying goods, passengers, or livestock, those who only provide labour, and drivers of vehicles owned, maintained, and insured by contractors.  

Classification

Each of these is likely to be classified as an employee, and therefore definitely fall inside of the IR35 rules. Simply put, this means that PAYE is due on their earnings and must be deducted before any payment is made to the driver. 

It is different for individuals classified by HMRC as an ‘owner-driver’ and includes those that own or lease the vehicle they supply. The HMRC guidance explains that these drivers are more likely to be classified as self-employed for tax purposes, and therefore outside of the IR35 off payroll working rules. 

Drivers who provide the vehicle are likely to be self-employed even if they work mainly for one business. This contradicts the examples provided for the SDC rules, so businesses should be careful if they have self-employed drivers who don't provide their own vehicle, as HMRC may well challenge their employment status position.

Recruitment and retention

As well as the impact and implications of IR35 – not forgetting Brexit and work visas – a shortage in available workers continues to blight the sector. However, a simple change to how they approach what they offer workers, and how, and one which won’t impact costs or operational resources, result in businesses quickly, easily and cheaply offering more to workers in a way that will help tackle recruitment, retention, and staff shortages.

Worker attraction and retention tactics vary from business to business, but often include employer branding, recruitment marketing, workplace culture – and benefits, with work-life balance now named as the main reason why candidates decide whether to take a job, and stay in it.

Employers should take advantage of mobile tech tools focused on employee engagement, benefits and rewards, particularly with support of their physical and mental health and wellbeing.  Times are hard, so they should also aim to add value to pay by helping workers’ money go further with savings and discounts on everyday spending, which are a powerful way to help take-home pay go further, and boost the perceived value of hourly pay rates. 

More information

David McCormack is CEO of HIVE360, a GLAA (Gangmasters and Labour Abuse Authority) license holder that operates extensively in the GLAA and industrial recruitment sectors, and provider of PAYE payroll support, comprehensive employment administration, and the innovative employment experience platform, Engage. 

HIVE360, provides HRMC compliant PAYE payroll services, with solutions designed to match the individual operations. The company also provides its innovative employment experience platform Engage as standard to businesses that outsource their payroll and employment administration to the company. The app includes My Health, My Money, My Discounts and My Work features, which give users secure access to numerous services and information. 

HIVE360 is a GLAA (Gangmasters and Labour Abuse Authority) license holder and operates extensively in the GLAA and industrial recruitment sectors. It has published a free ‘Attract: Engage: Retain: your complete guide to getting your people strategy right’ eBook which offers tips and advice on how to kickstart a people strategy, re-engage workers, and give their workforce a better employee experience. 

For more information visit:  www.hive360.com