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.