Criteria set for self-employed drivers to stay on the right side of HMRC
HMRC is tightening up its regulations on what makes someone self-employed – according to Just Coach Drivers MD Derek Haggerty. Agencies and coach operators in particular are being told to be aware as they could be liable for their self employed drivers’ tax and NI.
Derek said: “A lot of people are asking me where I stand on self-employed coach drivers vs. employed drivers because I have built my company using only self-employed drivers. However, ironically in order to go forward, I have had to go full circle with this part of my business.
“When I started out I only used self-employed drivers because the work was sporadic and it helped my ‘lean’ business model. Now we have grown, we find ourselves giving regular work to our drivers and in fact for the majority of our drivers we are their main source of income during the main season.
“This has meant going through some pretty tough growing pains and changing our work contracts almost annually. We are now working closely with HMRC to manage our drivers’ transformation from self-employed to employed and have come out the other side with a fully-endorsed structure. Like any successful firm we have competition but if that competition is relying solely on self-employed drivers, they will fall foul of the employment laws and HMRC.”
There are several criteria drivers must satisfy to call themselves self-employed:
- Right of substitution : Once a job is accepted, can the driver find someone else to do the job if he/she suddenly can’t make it? If yes, does the original driver take payment from the customer and pay the other driver for doing the job? If you answer yes to both these questions, this points towards self-employment.
- Place and time of work : If the driver is being told by the operator where to be and what time to be there to start a job, and what to do during the job, i.e. a route and itinerary, then this points towards employment. If the driver can choose when to start and how to do the job, this points towards self-employment.
- Regular work : If a driver is getting regular work from an operator and almost expects to be given work, this points towards employment.
- Risk : Could the driver be out of pocket by accepting a job at a fixed price i.e. will the travel, meals, expenses and driving time add up to less than what the driver is being paid? If there is a risk, then this points towards self-employment. If the driver agrees a fixed price plus reasonable expenses, then there is no risk which points towards employment.
- Insurance : Public Liability Insurance isn’t compulsory for drivers but it points towards self-employment. The majority of operators’ fleet insurance will cover named drivers, but a few cover employees only. In this case self-employed drivers needs to protect themselves by getting insurance with cover up to say £10m.
- Unique Tax Reference Number (UTR) : Self-employed drivers need to have a UTR which indicates they declare their self-employed driving income. However, a UTR itself is no indication the driver satisfies all the criteria of a self-employed person.
- Invoices : This is probably the weakest argument for a self-employed driver and is no indication whatsoever that they’re self-employed.
Derek added: “This list is by no means exhaustive. In short we’ve had to change how we work to comply with employment and tax laws. We’d encourage operators and drivers alike to do the same. Look carefully at how you operate as HMRC are on the case now.”