A tricky dilemma for agents…..

Tax evasion has been around ever since taxes were first thought up by the Romans, even the Vikings had their fair share of it …. the Anglo-Saxons evaded paying the Danegeld as early as the 700’s AD. 

The problem that many corporates will find from 30 September 2017, is that they might become responsible for the tax evasion of people, companies and foreign entities who are out of their control. 
The Prevention of the Facilitation of Tax Evasion Act becomes law very soon, making the very said facilitation, a criminal offence, with unlimited fines and the real prospect of a custodial prison sentence for those caught out, in less than three weeks time.  
How does this impact in the UK logistics sector?

There are approximately 20,000 “Self-Employed” Lorry drivers operating on the UK. Up to now, responsible for paying their taxes from the income that they have earnt. The fact that many of these drivers have failed to pay sufficient income taxes, national insurance contributions, VAT and corporation tax has been a cause of great irk and concern for successive Chancellors. 

The new law is very technical but in a nutshell pushes the drivers’ liability for the evaded taxes or lost exchequer monies up the supply chain to the accountants and the hirers of the said driving labour, and seeks to punish them for facilitating the dishonest acts of tax evasion by the same drivers.
Last year, I blogged that the such a move by  Chancellor was imminent. At Affirm, we have always taken driver compliance as a very serious matter. In April we took all of our drivers out of VAT registration, so that no driver could be tempted to “spank” the VAT money in their possession. 
We have always believed that paying the right amount of tax, on time is the best form of defence for any driver. Indeed, most driver’s rely on us to keep them up to date with HMRC in this regard. The change in the law has not changed anything from the driver’s perspective. Tax evasion was and still is a criminal offence.
However from the Agency viewpoint it creates a real dilemma when engaging a driver as a client or supplier – in as much as is the driver trustworthy and have they evaded paying any taxes.  
It also casts doubts on the Accountant that is providing services to the driver, as if they are knowingly facilitating the evasion of tax by the driver then not only is the Accountant in the frame but also the hirer of the driver ie the Agency.  

By nailing the facilitators of tax evasion, HMRC is hoping to collect a fairer share of tax revenues. 

What does this mean for the Agency? 
By engaging non-compliant drivers, an agency ultimately runs the risk of falling foul of the new legislation. A non-compliant driver is commonly not paying any or enough tax from its income paid to it by the agency. 

There is a simple way that an Agency can protects itself from the draconian provisions of the Act and that is to perform adequate “due diligence” on its drivers and the drivers Accountants. 

However, such a procedure cannot be performed adequately within the next three weeks. Though I doubt there will be a queue of  accountants and Agency directors by the beginning of October at the prison gates. 

However, as I blogged in March of this year, the Agency managing director must scrutinise the PSL for its payroll and preferred accountancy solutions. They must have robust procedures for ensuring their driver clients are both fully compliant and paying their taxes. 
Affirm Accountancy Services Limited are committed to ensuring complete tax compliance of all of their driver customers, providing every one of its drivers with a full compliancy report to present to its hirers. 
Never has it been as important to ensure that any HGV driver is paying its fair share of taxes and operating in a compliant manner. 
Neil Hooton is the Chartered Accountant engaged by Affirm Accountancy to provide specialist insight in to driver compliance. 

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10 tips for the HGV Agency driver. 

I often get asked by drivers about working for a full 12 months as opposed to eight flat out and then four quieter months. Here’s my Ten top tips for the Agency Driver…..and how to  work all year…. 

1. Maintain a high standard of professionalism. This means treating others as one expects to be treated. It also means showing loyalty to core customers and not moving on a for a 50p an hour pay rise….. 

2. Don’t resort to Facebook to fight your battles. Pick up the phone and actually manage and engage the problem. Texting and Facebook means you’ve probably lost control of the situation and got to be a near Shakespearean wordsmith in order to make your point effectively. 

3. Keep a daybook/journal/diary. Record all walk round issues, start-times, breaks, finish times, mileage from and to work, anything out of the ordinary. This is a contemporaneous note and makes excellent evidence in any dispute. It will also catapault you into the “stellar Driver” bracket. 

4. Become the “go-to” driver at the agency. The first name on the team sheet is the best place to find oneself. That is not say “takes loads of shit” – but find the balance of being helpful and courteous but not a “yes man….or woman”. 

5. Make a point of regularly downloading your digi-cards if you have ever have a problem… at the end of the day a small-claims court will adduce on proven actual work.

6. Learn how to Take the knock backs on the chin… after all you’re in business – it’s hard work out there… but the 1973 Agency Act is protection to ensure that you get paid for actual work done… i am afraid to say that non-payment of guaranteed shifts cancelled at the last minute are not usually covered by the Agency Act – only actual work performed. 

7. Embrace and use digital technology. It is there to save you time and of course money. You can do most things with a mobile phone nowadays – bar driving a wagon (well not yet). 

8. Stay compliant. That is “o” licence compliant and also financially and taxation compliant. No transport manager has ever liked a “bent” driver… they are not going to start now. 

9. Know the law. The Highway Code is over 50 pages long and Croners Transport is over 400 pages. Nobody is suggesting that you memorise every subsection… but you must have a good-working knowledge of the laws affecting Road Transport. 

10. See your CPC courses as an educational opportunity and not as a chore. There are some interesting courses out there. Embrace them, grow your knowledge and prosper. 

The above tips are all common sense… but following them will differentiate you from the ordinary into the “super-driver” bracket. Forget the fat of the summer months… think about the January to March period…. be that STAR…… 

Storm clouds over U.K. Drivers

With an anticipated change in the tax laws following this Autumn’s Budget, probably as early as April 2018, comes the opportunity for the managing director of the agency to review the way that they contract with accountants and payroll companies. In light of the recent upheaval in the public sector, what is HMRC planning in the way of the private sector?

Given that resources are thinly spread at  the HMRC, an obvious target would be a renewed attack on the ‘self-employed’. The April 2017 Public Sector Fiasco was caused by the changes being announced ahead of the IT infrastructure being built. It left a vacuum which was filled by unscrupulous payroll companies, jumping on the “umbrella bandwagon”, and forcing many limited company contractors to abandon their PSC’s.
Could history repeat itself in 2018? The private sector could be hit with a slight tweak to Agency law, whereby the hirer becomes responsible for determining the employment status of the contractor. This will inevitably mean that most agencies will probably adopt a safety first position and are therefore most likely to treat any non-compliant PSC’s with disdain, and probably force the contractor on to either an Umbrella product or PAYE.  
As in the public sector, the compliant, private sector PSC will find it difficult to prove itself is on the right side of the tax law. 
The logistics sector is currently riddled with thousands of “not very compliant” limited companies where the driver is often the only director. Many of these companies, are composite entities, not really controlled by the driver per se, but by “accountants” or by companies purporting to be accountants. 
At Affirm Accountancy, we have always maintained the following position. A PSC driving company is non-compliant if any of the following factors are present:
– A lack of independence on the financial operation of the driver’s company i.e. No control of the driver’s company’s bank account;

– Not having public liability insurance; 

– Failing to engage with more than hirer;

– Failing to demonstrate its compliance by not undertaking the HMRC “IR35” tool; and

– Not paying the employee ie the driver through by RTI and a PAYE scheme. 

One clever way the Government might choose in managing this mass-non-compliance might be through the ultimate hirer’s O-Licence – whereby the Traffic Commissioners could revoke the licence of any haulier that used non-compliant driving PSC’s. 

It is my opinion, that the UK logistics industry has at best 19 month, but at the very least 7 months, until April 2018 to sort it’s act out and make the financial compliance of its drivers, as important as maintaining the operational compliance. It would certainly focus the minds of the hauliers who currently rely on the agency labour to meet is current capacity. The storm that is currently brewing might pass over, but the portents are not so good for driver’s who are non-compliant. 

Neil Hooton

Charted Accountant at Affirm Accountancy. 

Ten years after the introduction of the MSC legislation, how does this rule and its follow up TAAR effect the current Agency landscape and providers of accountancy and payroll services to PSC’s?

With the change in the tax year and tax laws are amended and reviewed, comes the opportunity for the managing director of the Employment Business/Agency (“Agency”) to review the way that their Agency contracts with ‘accountants’ and ‘payroll companies’. In light of the upheaval in the public sector, what is HMRC planning in the way of the private sector in 2018?

Given that resources are thinly spread at HMRC an obvious target would be a renewed attack on work-seekers using the ten years old piece of under-used, Managed Service Companies  or (MSC) Legislation, which was beefed up in 2014 with a TAAR (Targeted Anti-Avoidance Rule) aimed at NIC avoidance.

In short, and to refresh your memory, a Managed Service Company (MSC) is a company structure that is managed and controlled by a third party that administers and influences payments to a “work seeker”.  It developed from attempts to avoid IR35, with external “advisors” controlling a freelancer’s personal service company, and therefore the work-seeker is not necessarily truly self-employed so HMRC rightly perceive that insufficient tax is being paid.

As a result, MSC legislation requires all income through this structure to be taxed as employment income, subject to PAYE and NI in full rather than the option to pay in dividends.  Any business that manages or promotes the use of an MSC is classed as an MSC provider, and therefore the work seeker is taxed accordingly.

If an MSC does not pay its taxes in full, HMRC can demand the unpaid tax from other parties, including transferring the debt personally to the other directors of the MSC, the intermediaries who formed the MSC, or those deemed to have encouraged the work-seeker to use the MSC route (potentially an unwitting Agency”). The underpaid tax can be demanded from these parties either individually or together.

Introducing a Targeted Anti-Avoidance Rule for intermediaries

David Gauke, Secretary to the Treasury speaking on 1st May 2014 introduced a further targeted anti avoidance rule.

The “Clause 5” introduces a new TAAR into the Social Security (Categorisation of Earners) Regulations 1978 (SI 1978/1689) to ensure that workers who would be employees as a result of these regulations but for the imposition of ‘artificially constructed intermediary arrangements’, are treated as employees for NICs purposes.

The TAAR is modelled on Section 46A of the Income Tax (Earnings & Pensions) Act (ITEPA) 2003 (introduced by Section 16, Finance Act 2014) which is the parallel TAAR applying for income tax purposes in relation to agency workers.

The TAAR in Clause 5 is however more broadly based in that it extends beyond purely agency workers. It also applies to (i) employees employed by a foreign employer who are supplied to a host employer in Great Britain and (ii) cases where an individual work seeker provides their services further to a contract between an end client and a UK agency.

In any event, we agree that the better approach is to broaden the primary NIC legislation to make specific provision for regulations to address situations where a TAAR may be appropriate in determining the status of earners, and who should be the secondary contributor for NIC purposes. This is what Clause 5 does, in a typically convoluted way.

The TAAR’s approach

The approach in Clause 5 is to focus on ‘the main purpose, or one of the main purposes’ of the arrangements that have been implemented in testing whether or not the TAAR should bite.  The Government therefore introduced a TAAR in the legislation to deter such avoidance. It is designed to enable HMRC to consider both:

  • the motive for setting up the arrangements in the first place
  • whether it is set up with the motive of avoiding income tax and NIC; and
  • what it achieves – whether it results in less income tax and NIC being paid.

The Chartered Instistute of Taxation commented: “HMRC would be able to use the TAAR in the most egregious cases where, for instance, an agency requires all of their workers to set up a PSC to avoid the new legislation and thus paying NIC.”

Personal Service Companies (PSCs)

This is a particular area which we think may require some further consideration and that is where work-seekers work for their own personal service company (PSC).

HMRC have said that generally speaking the recently enacted specific income tax and NIC legislation relating to work-seekers (in particular agency workers) is not intended to apply to PSCs. However, it strikes us that the potential difficulty here is that PSCs are typically established for a variety of reasons and that things are not generally so black and white. For example, an individual may decide to establish a PSC both because of the attractions of limited liability and because they may be able to reduce their tax and NICs bill at the same time, or prefer the work life balance of being self-employed in a structure that is relatively easy to operate and undestand.

For example, HMRC say that ‘in most cases the agency legislation has never applied, and will continue not to apply, to PSCs because the agency legislation does not apply where…the remuneration is not in consequence of the worker providing their services under the contract…[and] it will not apply in most cases where profits are withdrawn as dividends as this is a return on capital distribution, not remuneration in consequence of the worker providing their services’.

HMRC has also said that in so far as the TAAR is concerned then ‘people who set up PSCs for a reason other than reducing tax – such as the limited liability protections incorporation provides – would not be within the TAAR. HMRC will continue to monitor activity in these areas’.

We think it would be helpful if HMRC could set out its position on whether it is intended the TAAR should or should not apply to the PSC in these circumstances. HMRC recognises that Agencies may be concerned that their core business of placing ‘work seekers’ with end clients may bring them within the scope of the MSC and TAAR legislation.

Managed Service Companies

In its guidance notes it makes the following comments on MSC’s

“Neither Chapter 9 ITEPA, nor section 688A ITEPA, actually applies to Agencies carrying on their core business. There are specific exclusions in both sets of legislation for such businesses. Nor will the legislation be applied to Agencies which undertake services which are merely ancillary to the core business.

However, be aware of the following as if an Agency is:

  • Demonstrably carrying on a business of providing structures (companies or partnerships) through which workers provide their services, and provides services to those structures to the extent that they would be considered to be “involved” as described in section 61B(2), then that Agency would be an MSC Provider; or
  • Demonstrably acting in concert with a person who is an MSC Provider for the purposes of securing that an individual’s services are provided by a company, then that Agency would be an associate of an MSC (but see preferred supplier list question below); or
  • Demonstrably encouraging an individual to operate through an MSC and/or beyond the mere placing of the worker’s company with end clients and functions directly linked to such placing, or is otherwise actively involved in the MSC’s provision of the worker’s services, then that Agency would potentially render itself liable for the transfer of any PAYE/NICs debt of the MSC.”

The Think Accounting and New Wave case altered the MSC landscape, as therefore as a responsible, MD of an Agency , you should ask yourself the following three questions.

Question 1. So does the above legislation (MSC and TAAR) preclude the Employment Agencies and Businesses operating preferred supplier lists?

Question 2. What are the indicators a service provider may be an MSC provider?

Question 3. What can I realsitically tell a work seeker – where the Work seeker already operates through an existing PSC company or is intending to use that structure?

Question 1. PSL’s good idea or not

  • So does the above legislation preclude the Employment Agencies and Businesses operating preferred supplier lists? Answer  The referral of work seekers to preferred suppliers does potentially increase an Agency’s risk in terms of transfer of debt.
  • However, HMRC does not wish to discourage the use of “preferred supplier lists” as it recognises that these have a legitimate cost saving function.

Where HMRC may become interested, however, is in the forced use of a particular service provider or a particular structure – be it PSC, umbrella or Sole Trader on a work-seeker. i.e. it is a limited company through X Limited or we can’t give you work”………. Let’s hope then that the preferred Supplier is not found to be a MSC provider then………..

The guidance notes goes on to say, “In determining whether referral by an Agency of a work seeker to a preferred supplier might constitute encouragement, HMRC will consider all of the facts relating to that referral to establish whether the underlying motive was that of encouraging the work seeker into an MSC. For example, HMRC would consider whether the Employment Agency had taken reasonable steps to satisfy itself regarding the status of the provider (subject to the fact that limited information is available to an Agency.)”

To help Agencies decide whether a preferred supplier may be an MSC Provider, HMRC has produced “Indicators of whether a service provider may be an MSC provider”.

Question 2. ‘MSC provider’ or ‘Accountant’?

The following questions, again detailed in the MSC guidance notes, though the answers may not be necessarily, transparent with your dealings with the Service Provider, are for the Agencies to consider but include the following:

  • Does the service provider interpose themselves between the individual/company and the recruitment Business in any other way whatsoever i.e. provide a legal service to act on behalf of the work seeker in times of dispute?
  • Does the service provider only support service company clients?
  • Is the individual work seeker unable to change service provider and retain their company i.e. does the service provider have a large release fee for information or a de-archiving fee for newly appointed advisors?
  • Do all of the companies the service provider supports have a unique identifier? (e.g. John Smith 125 Ltd, Pete Brown 125 Ltd.)

If the answer to any of the above questions is “yes”, the service provider may be an MSC provider and therefore one to avoid using.

Question 3. What can I ask/tell a work seeker – where the Work seeker already operates through a PSC company or is intending to use that structure?”

The MSC guidance notes are pretty explicit in how you should deal with your work seekers or Agency workers.

  • Does the Agency need to establish whether the Agency worker’s company is an MSC or PSC? Answer: No. If the work seeker approaches an Agency and already operates through a company, then there is no need to ask any questions as to the nature of the company. (The mere engagement of an MSC would not in itself render you potentially liable to the MSC’s debts.)
  • If I know, or I am told by the worker, that their company is an MSC, can I still arrange work for the work seeker? Answer: Yes. Provided that you are merely contracting with an existing company and not one through which you have encouraged the work seeker to operate.
  • Can I explain to a work seeker that different pay rates apply depending on whether they work through a limited company, direct through the Employment Business etc?  Answer. An Agency can provide factual information only without commenting on the merits or otherwise of a particular payment model. It should point out that each payment model has different tax, National Insurance and contributory benefit implications. If the work seeker needs more information, they should seek independent advice.
  • Can I explain to a work seeker that a particular end client will only engage work seekers operating through limited companies? Answer: An Agency can provide factual information only. If certain clients will only engage workers operating through companies, provided that those end clients are relevant to the work the work seeker is seeking, then such a statement would be the provision of factual information.
  • Can I advise a work seeker that a particular type of engagement model would make them more “saleable” in the market place? Answer: This is not advisable, as it may well stray beyond the provision of factual information. It is acceptable to set out the various engagement models and the different pay rates relating to them. But an Agency should point out that each payment model has different tax, National Insurance and contributory benefit implications. If the work seeker needs more information, they should seek independent advice.
  • If a work seeker asks what the best engagement model is, can I tell them? Answer: No
  • If a work seeker asks how they arrange to work through a limited company, what can I tell them? Answer: An Agency can refer them to a preferred supplier or preferred supplier list but this by its nature carries some risk if the preferred supplier is an MSC provider. See list of high level indicators as a way of mitigating this risk in question two above.”

As it is ten years since the MSC legislation was introduced, how does your business fare in answering the three main questions above?

It might pay to sit up and take note because  in our opinion, HMRC is a wounded animal, following the Chancellor’s recent dramatic U-Turn on NIC for the self-employed. Additionally, since HMRC does have powerful transfer of debt provisions for those caught using Managed Service Companies, who are found to be involved in their clients’ business affairs, a hefty tax bill might ruin your bonus chances in 2018.

In summary, you should be careful of which “accountants” you use on your PSL’s, checking regularly that they are not MSC’s providers involved in the provision of artificially contrived schemes for company administration, when both the Agency and the work-seekers thought they were using a safe PSC, instead they were intrinsically linked to a MSC provider. Finally, you should perform a satisfactory level of due diligence and understand the compliance of the structures your work-seeker uses.

A solution to the problem of dealing with non-compliant driving PSC’s. 

The TAAR 2014 (Targetted Anti – Avoidance Rules) , were brought into stop intermediaries manipulating the Agencies legislation and setting up their employees as ‘false-employment’ private service companies. Too many workers in the logistics sector were taken ‘off-payroll’ by setting up thousands of small limited companies and therefore avoid paying billions of pounds of NIC. 

However, anyone who has run a small limited company will testify – ” it ain’t plain sailing”….. often small businesses fail as a result of poor management decisions leading to adverse cash flows. 

Today’s blog will assist the manager of the agency worker in choosing the right calibre of  compliant workforce. There are  four  key points to make.

1. Choose your Agency Workforce from the widest net possible, performing basic due diligence on the work experiences and how they have structured their business affairs. Ask to see their “day-book” or “diaries” as the higher calibre drivers will record must important events of a days work in a journal. 

2. Don’t be tied down with your accountancy and payroll providers on your PSL. Often larger accountants put quantity over quality. Smaller accountants, who understand the logistics business invariably have smarter, higher calibre drivers on their books.

3.  Engage only 100% compliant drivers. Okay. So what is a 100% compliant driver? 

A) Holds upto date Driver CPC;

b) Operates through a limited company with no taxation or filing liabilities;  

c) Uses a limited company bank account, which is controlled by the driver;

d) Operates a PAYE scheme correctly, and understands whether IR35 applies to a contract through an Agency; 

e) Is trading in a fit and proper manner with Public Liability Insurance in place; and

f) Has full control of the company’s affairs….. ie the Driver decides for whom they work for and how much is received. 

4. Remember the maxim. It is always about the drivers…drivers….. drivers.  Protect them and look after their interests. A good agency driver will is worth his weight in gold and probably fewer headaches than a poorer agency driver. 

We are currently rolling out the DriverPlus Assured Driver Kite-mark scheme. -All of our clients are quality, independent driver PSC’s and to be inducted into the scheme not only demonstrates an outstanding level of professionalism but also a very high degree of compliance, and will certainly make great Agency driver’s for your agency. 

A sensible approach to driver PSC’s

The attacks on PSC’s, by a government intent on removing them from the flexible workplace, has been at times brutal. Relentless waves of legislation have cleverly cocked a snoop at the unscrupulous ‘accountants’ who have exploited loopholes in the U.K. Tax system.

Firstly, with the introduction of the Dividend Tax in April 2016, removing the NIC avoidance, secondly with the proposed introduction of the Low Cost Trader rules to target the abusive use of the Flat Rate VAT scheme.  Finally, the pincer movement will be completed when Chapter 10 of the Income Taxes (Earnings and Pensions Act) 2003 is extended to cover private sector organisations, probably at some time in 2019, thus levelling the playing field between employed and the self-employed in terms of income taxes.

The spectre of IR35 has been lurking around for some time now and will finally become a reality in the private sector when determination of a PSC’s work status is taken out their hands and passed up the supply chain to the agency.

So what does all this mean for the genuine freelance HGV Driver using a PSC?

Remuneration & Dividends

Following the introduction of the Dividends Tax in  April 2016, the old method of extracting money from a PSC of using a low PAYE salary, topped up by Directors’ loan account expense payments and a large dividend is not advisable, leading to increased antagonism from HMRC.

A fairer and better solution might be to increase the amount paid under your PAYE scheme to roughly half of your invoiced income, retaining a modest amount of expenses and paying a smaller dividend. This at least meets the HMRC more than half way towards full IR35 and gives the PSC and opportunity to offset its genuine costs of being a freelancer, such as claiming home to temporary workplace travel costs,  bona fide subsistence allowances, and other business costs like accountancy, work-related office expenses and insurance costs.

VAT

In the short-term, nothing much will change. The Drivers who are ‘pure Labour Providers’ will lose the benefit of the Flat Rate Surplus and so will lose approximately 5% of their gross income.

Drivers who are currently using the 10% ‘Freight Transport by Road’ category are being advised by HMRC to migrate from this, on to the 12% ‘Business Services: not listed elsewhere’ category, provided that they do not meet the Low Cost Trader category i.e. their ‘relevant expenditure’ exceeds £1,000 per annum.

Some will migrate off the Flat Rate Vat scheme onto Standard VAT accounting, recovering a small amount of purchase VAT. Others will choose to come out of VAT in its entirety. A mass de-registration will not occur, however, as inertia and a wait-and-see attitude will probably prevail, as there are restrictions placed in VAT law about chopping and changing between VAT schemes and registration.

IR35

The spectre of IR35 in the private sector is another kettle of fish, and needs to be treated with the utmost respect. Every driver will need a viable business plan, setting out their business goals and is a roadmap to successfully navigating the present choppy waters.

The only feasible solution is to diversify a Driver’s PSC into something a little more subtle and genuine than a mere driving machine. During the last major credit crunch, I advocated that people should have at least two revenue streams – a paid Full-time job and a secondary part-time way of earning supplementary income. The advances in technology since 2010 have been astonishing and have now opened up the “new gig economy” participation in which has become a new necessity. Since HGV drivers are naturally transient types, they are well suited to exploiting the opportunities that are presenting themselves; be it in parcel delivery and collection, upselling items in EBay or just doing the odd job here and there.

As there is no right or wrong way of operating a true freelance PSC, general guidance should be followed, namely using a limited company bank account, where the PSC is in control of the bank account, procuring a sensible level of public liability insurance, and carrying on the business on as a proper freelancer, on an interim basis i.e. as a hired  driving services professional that is not at the same agency continually month in, month out, year in, year out.

With all business risks, there needs to be some rewards, that will come in the form of a greater degree of flexibility, a better working environment and improved rates of pay.

In summary then, the future of the UK’s flexible logistics workforce has been jeopardised by the sham accountants who have seen the merit of setting up a limited company for a traffic warden in Preston, or a warehouseman in Doncaster, over a genuinely hard-working HGV Driver – who has professional competences and a highly regulated workplace.

At this present time, there is no reason to abandon your PSC in favour of going “cards in”.  Some good will surely come out of the current and future changes…. though as with all medicinal cures, it might leave a slight bittersweet taste but should make you better.

Neil Hooton is a Chartered Accountant specialising in the UK logistics industry.

Is it time for a new Agency model for the logistics industry?

The current buzzwords in HR circles are “CrowdSourced workforce” and “millennial mobilettes”. What are they on about and can they be applied to the UK logistics industry? 

Crowd-Sourcing is a term used to describe a supply chain which is assembled in response to a specific demand, predominantly from within a digital platform…..

Millennial Mobilettes  are the younger, more digitally adapted strata of the workforce, who rely entirely on their mobile phones in order to function and operate…..

How can these two phenomena interact within the UK logistics industry? 

A little bit of background is needed here in order to answer this question.

The UK logistics industry is very hierarchical. The top strata is inhabited by the very large logistics national groups e.g. DHL, XPO, Wincanton etc. They dominate the industry and the way that business is conducted. Predominantly drivers retained by their companies under PAYE arrangements or to coin and old phrase- ‘cards in’. The next strata down is a host of large regional players, again staffed by a rigid workforce under PAYE. Both sets of hauliers are supported by agency workers provided by the  ‘national’ recruitment firms who have large Driving divisions… Staffline, 24-7,  ADR Network and Transline. The Agencies are in turn supported by large accountancy representing thousands of independent HGV limited companies and the same accountancy companies operating Umbrella/payroll bureaux to employ the remaining agency drivers. 

However, technology will soon render this model as obsolete. Why? Becasuse technology will compensate for the skill set of the Agency and changes in workplace modus operandi I.e. Making Tax Digital and the IR35 reforms will drive the larger accountancy firms out of the picture….. it can all be done on a mobile phone….. sourcing work and the subsequent accounting for it. 

The real investment for the savvy Agency and accountant will be to embrace the new technology and develop Apps which will break the current supply chain before technology turns them into the Betamax of the recruitment world….. watch this space……