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.
Charted Accountant at Affirm Accountancy.