If you can cast your mind back to 2018, you might remember the UK government first announcing that the IR35 tax reforms would be extended to the private sector in early 2019. Of course, 2019 proved to be a too ambitious target and so the introduction was swiftly postponed until April 2020 – and we likely don’t need to remind you of what was centre stage then.
Fast forward to April 6th of 2021, and the proposed reforms finally took effect. After this date, all public sector authorities and medium/large-sized private sectors would be responsible for deciding whether the new rules applied to their situation. Similarly, if an individual worker provides services to a small client within the private sector, then the worker’s intermediary will remain responsible for identifying their employment status and deciding if the rules apply.
But we’re getting ahead of ourselves because to understand how the IR35 reforms could affect your logistics solutions, we need to start at the beginning!
What is IR35?
The IR35 tax reforms were drafted with the core aim of combating tax avoidance by workers who provide services to a range of clients through an intermediary source – as well as the firms that hire them. In many cases, if the intermediary was taken out of the equation then these workers would be considered an employee – meaning the Tax and National Insurance regulations would differ. So simply put, the IR35 reforms set out to identify ‘disguised employees’ and prompt involved parties to pay the necessary Tax and National Insurance contributions.
In the government’s own words, these rules ‘make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same Income Tax and National Insurance contributions as employees.’
What this means for freight
Whilst these reforms will not directly impact Forest Freight, the same can’t be said for other hauliers. The new tax regulations will force all businesses to investigate and review all non-employee worker arrangements – for example, outsourced truck drivers. If they find that the worker in question now falls under ‘employee’ status – which will often be the case – then back pay of any National Insurance and Income Tax contributions will often arise for involved parties. This will remain the case even if the initial agreement between the worker and a haulier firm was made on a self-employment basis.
To better understand the far-reaching consequences of this change, it’s best to place the new rules within a freight context. If a company or firm is instructing a driver, organising their day or providing the necessary equipment and tools for their role, then the driver will likely be categorised as an employee. So, hauliers who often look towards agency drivers or self-employed drivers could find themselves in a sticky spot with vastly increased employment costs.
Of course, it can sometimes be difficult to determine what employment status applies to your workers which is why the government has additionally published its Check Employment Status for Tax (CEST) tool. However, they’ve been adamant that this tool can not be used with finality – it rather acts as an initial guide.
What this means for freight workers
Whilst the IR35 reforms will likely cause a multitude of issues for firms that frequently utilise self-employed or agency workers, it can also have a significant effect on the workers themselves. For example;
- Drivers could face a significant cut to their annual income
- Drivers from the EU may seek employment elsewhere, avoiding UK freight
- Drivers may seek permanent employment with a freight provider or an entirely new career
In any case, it does not paint an entirely bright picture.
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At Forest Freight, we’re proud to be fully self-reliant. Within our nearly 50 years of experience, we’ve developed a network of experienced, reliable and in-house hauliers that get the job done every time. So neither your business, our head office or our individual workers need to worry about how the reforms will impact your consignment!
If you’re ready to speak with Forest Freight’s experts about how we can help to transform your logistics solutions, then we’re ready to provide the answers.
