Backhouse Jones Watermark

Self employed commercial vehicle drivers

11 September

Self employed drivers are currently a major concern for both HMRC and Traffic Commissioners. It is therefore imperative that operators know exactly where they stand in relation to the employment status of their drivers, as the consequences for businesses getting it wrong can be disastrous.

RS Dhillon and GP Dhillon Partnership v HMRC

In the 2017 Tribunal Tax Chamber case of RS Dhillon and GP Dhillon Partnership v HMRC, the question to be considered was whether drivers engaged by the appellant partnership to drive its lorries were employees of the partnership or independent contractors.

The facts of the case were that the partnership had access to a pool of drivers, with no written contracts in place between the partnership and the drivers. The partnership engaged drivers usually by telephone call the evening before the job. Drivers then picked up one of the partnership’s lorries on the morning of the job, typically parked at one of the customer’s sites, and then drive to the construction site to upload, before returning the vehicle to the customer’s site.

The drivers were paid a fixed rate per day and received no other benefits such as holiday pay. There was no guarantee of working being provided, the drivers could refuse work and the driver were free to work for other businesses as well. In order to be eligible for selection to work, the drivers were required to attend training courses and undergo an initial two-week unpaid induction period.

Section 2(1) Social Security Contributions and Benefits Act 1992 defines a “employed earner” as a person who is gainfully employed in Great Britain either under a contract of service, or in an office (including elective office) with general earnings. A “self employed earner” is defined as a person who is gainfully employed in Great Britain otherwise than in employed earner’s employment (whether or not he is also employed in such employment).

The same Act makes the employer liable for the payment of National Insurance Contributions and the PAYE Regulations require the employer to deduct an account for PAYE when making payments of employment income to an employee.

When determining whether or not a person is an “employed earner” for tax purposes, there are a number of tests which may be considered. The below list is not exhaustive, and it should be noted that these tests are not to be used as a checklist, but rather to assist in the making of an “informed, considered, qualitive appreciation of the whole picture”

Tests:

  1. Whether the worker is in business on their own account – factors taken into consideration may include whether the worker’s own equipment is being used, does the worker take any degree of financial risk and what level of responsibility does the worker have for investment and management?
  2. Control – who has the power to control what the worker does?
  3. Mutuality of obligation – is there an obligation on the employer to provide and pay for work and an obligation on the worker to accept the work?
  4. Substitution – is the worker obliged to carry out the work himself or can he send a substitute?

In this case, the Tax Tribunal found there was no evidence that the drivers were running their own business and the relationship between the drivers and Mr Dhillon was one of “master and servant”, with drivers being engaged on terms which were unwritten and non-negotiable. This therefore led to Tribunal to conclude that drivers were employees of the partnership, rather than self employed contractors.

 

Self employed drivers and Operators Licensing

The recent Upper Tribunal case of Bridgestep Limited considered whether self employed driver contracts are consistent with the operator’s responsibilities under their operator’s licence.

The operator was called to a public inquiry following a bridge strike. This brought to light the fact that the operator was using self employed drivers, however the reality was that all of the drivers were in fact employees.

The Upper Tribunal Judge stated, “Unless they are an owner-driver, it is very rare for a lorry driver to be legally self employed.”

In this case, the Company inserted clauses into the drivers’ contracts which were designed to give the drivers a degree of control over the vehicles provided to the drivers by the company and over their work, for example, by being entitled to provide another driver as a substitute, however this was found to be fundamentally undermined by the Driver’s Handbook.

Furthermore, they found that the consequence of the decision to engage the drivers on a “self employed” basis was that the company and the transport manager felt unable to give any instruction to drivers, whether it be in relation to route planning or otherwise and as a consequence, the company were unable to have continuous and effective management of the transport operation. The Upper Tribunal found that the operator put the competitive advantage they gained from using “self employed” drivers before compliance.

The Upper Tribunal therefore upheld the Traffic Commissioner’s decision to revoke the operator’s licence and the loss of repute of the Transport Manager.

Conclusion

It is highly unlikely that a HGV driver is truly self employed, unless they are an owner driver with their own operator’s licence.

Whether or not a driver is employed or self employed is a matter of law and it is not simply determined by the terms and conditions that the driver works under. It should also be noted that HMRC are now also targeting any operators using agency drivers with self employed status.

There are serious consequences for any operators found to be breaking the rules. HMRC can effectively double the tax bill and add interest on top that.

Further, operators found to be using “self employed” drivers are also likely to face serious regulatory action, including revocation and loss of repute.

It is therefore vital for any operators who may be using self employed drivers to review the employment status of their drivers as a matter of urgency.

For further guidance contact a member of our regulatory team on 01254 828300.

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