In being asked to produce a definitive document by my esteemed editor, I must caveat my entire article by saying that one of the most important things for you to note is that you as a hire and reward operator, are not supposed to decide whether your drivers are employed or self-employed.  It is also increasingly less important because of recent cases whether you supply or do not supply cars, either rental or company.What I mean by that, is that the expectation is that you will make the commercial decision as to your trading model and then measure it against the HMRC’s criteria. There is

What I mean by that, is that the expectation is that you will make the commercial decision as to your trading model and then measure it against the HMRC’s criteria. There is online testing tool (https://www.gov.uk/guidance/employment-status-indicator) which according to the HMRC:

“The ESI tool enables you to check the employment status of an individual or group of workers – that is, whether they’re employed or self-employed for tax, National Insurance contributions or VAT.

The ESI tool can help you if you’re: someone who takes on workers such as an employer or contractor; an individual worker; agency workers; anyone providing services through an intermediary – referred to as IR35 arrangements”

However, just to add to the complication, some of their criteria is laid out in law but some of it is their own interpretation. This interpretation, (like all interpretations), can be questioned by us (the operator or his trusted advisor) at appeal or tribunal. So as usual nothing is as simple as it first appears. The reality for many an operator is that the choice is about compliance versus cost savings and the level of risk you plan for. Our industry is becoming increasingly diverse, technical and ultra-competitive. For many in the future unfortunately the cashflow will get them before The HMRC ever does. However, I digress.

On October 28, 2016, Messrs. Aslam and Farrar won the right in tribunal against Uber, to be treated as “workers”. I have written much about this and its ramifications to the industry both good and bad. However, the term worker is not new, the regime wherein drivers are more aware of having these rights (whether they want them or not) is here.How do we practically set out a system that values the driver, who in most cases not only are genuinely self-employed, want to be self-employed but are also as much a client to many operators as the people sitting in the rear of the

How do we practically set out a system that values the driver, who in most cases not only are genuinely self-employed, want to be self-employed but are also as much a client to many operators as the people sitting in the rear of the car.

How do we therefore trade keeping all parties happy? The Driver, The Client, their accountant and the HMRC?

How should operators engage their drivers. Please notice at this stage that I use the word engage, not employ or contract. We will come to the importance of the terminology in the eyes of The HMRC and the courts later.Obviously, to employ refers to someone being put on a company payroll and paying Class 1 NICS, this also means that the employing party is subject employers NI at 13.8% and statutory holiday and sick pay. So, what is the benefit of employing?If you employ subject to the current terminology they are under your supervision, direction and control. You can tell the driver when to work, how to work, how to present themselves and how to deal with the client. They are obligated to adhere to these, subject to reasonable treatment and legislation; like the working time directive and other human rights. Is the most suitable commercially? In truth, if you want to exert this level of adherence to your company practices – this is the way to do it. Once

Obviously, to employ refers to someone being put on a company payroll and paying Class 1 NICS, this also means that the employing party is subject employers NI at 13.8% and statutory holiday and sick pay. So, what is the benefit of employing?If you employ subject to the current terminology they are under your supervision, direction and control. You can tell the driver when to work, how to work, how to present themselves and how to deal with the client. They are obligated to adhere to these, subject to reasonable treatment and legislation; like the working time directive and other human rights. Is the most suitable commercially? In truth, if you want to exert this level of adherence to your company practices – this is the way to do it. Once

If you employ subject to the current terminology they are under your supervision, direction and control. You can tell the driver when to work, how to work, how to present themselves and how to deal with the client. They are obligated to adhere to these, subject to reasonable treatment and legislation; like the working time directive and other human rights. Is the most suitable commercially? In truth, if you want to exert this level of adherence to your company practices – this is the way to do it.

Once again however life is not always black and white but a series of greys. In the wake of the current tribunals and the impending AL and gig economy cases, it is still well worth setting out your stall.The background to SDC legislation, (it is going to be in a previous article somewhere)Trading vehicles? Firstly, it is important to look at your driver engagement to be suitable

The background to SDC legislation, (it is going to be in a previous article somewhere)Trading vehicles? Firstly, it is important to look at your driver engagement to be suitable

Trading vehicles? Firstly, it is important to look at your driver engagement to be suitable to your own working practice. People often ask me what is the typical trading model is within this industry, and unfortunately for technicians like me who need to put things in little pigeon holes. There is very little commonality. From private hire cars taking cash on the street to through the out of town taxi circuit incorporating public and private hire to executive circuits and on to Chauffeur the network of small chauffeurs both sole trader and incorporated.Let’s look at these trading models. It seems that for many in the Private Hire and

Let’s look at these trading models. It seems that for many in the Private Hire and chauffeur world, planning is a dirty word (I say many but thankfully not all). We can’t really go in to too much detail here because everyone and every company has different view to trading.However, to understand where we need to be, let’s look at the basics, there are initially only three ways to trade.Sole traders- simple to set up but you are personally responsible for your business’s debts, and therefore can’t afford to get anything wrong. There is nothing to stop a sole trader using the services of other sole traders or subcontract to other sole traders. It’s only once again if you need that total level of control it’s time to have that payroll with all the incumbent taxes that go with it. Partnerships- A partnership is the simplest way for 2 or more people to run a business together. You share responsibility for your business’s debts. You also have accounting responsibilities. The obligations and

However, to understand where we need to be, let’s look at the basics, there are initially only three ways to trade.Sole traders- simple to set up but you are personally responsible for your business’s debts, and therefore can’t afford to get anything wrong. There is nothing to stop a sole trader using the services of other sole traders or subcontract to other sole traders. It’s only once again if you need that total level of control it’s time to have that payroll with all the incumbent taxes that go with it. Partnerships- A partnership is the simplest way for 2 or more people to run a business together. You share responsibility for your business’s debts. You also have accounting responsibilities. The obligations and

Sole traders- simple to set up but you are personally responsible for your business’s debts, and therefore can’t afford to get anything wrong. There is nothing to stop a sole trader using the services of other sole traders or subcontract to other sole traders. It’s only once again if you need that total level of control it’s time to have that payroll with all the incumbent taxes that go with it.

Partnerships- A partnership is the simplest way for 2 or more people to run a business together. You share responsibility for your business’s debts. You also have accounting responsibilities. The obligations and exposures however are like the sole trader.

Limited companies – If you form a limited company, the individual is protected however there are more reporting and management responsibilities. Therefore, the contract chain is clearer. Limited companies can still however contract to other Limited companies and engage drivers in multiple ways once again if there is transparency and a clear contractual chain.

Any of these entities can also choose how to engage with services. What I mean by that is we must also look at who the client is? Is it the driver or the client or both? How and who will you charge for your services. A full-service chauffeur company or a commission only agency are two very different animals and it is very important when starting up, growing your business or acquiring a new business you are aware of how the HMRC looks at you. The truth is you can’t have your cake and eat it. Here are my pointers for a simpler life.

Be consistent in how you collect and pay your money to your customers and your drivers. Decide who your clients are. For example; agencies clients are the drivers; a chauffeur company serves its corporate account clients. Think about what makes you competitive. Talk to your accountant about the type of market you want to trade in and the company you want to become and let them help you put safeguards and compliance in place.

Let’s look at how these trading models take on their drivers. Here is a top nine (I couldn’t find ten) of current market engagement choices:

1. Employed under contract. You will be expected to run a payroll and undertake formal reporting procedures, pay for their national Insurance and of course now provide a workplace pension.

2. Self-employed sole traders engaged directly, sometimes known as affiliates or sub-contractors.

3. A Back-office support service. Offering admin support to the self-employed driver who is contracted directly to the operator, but through a third party.

4. Working as a Limited company, with you as the director, however if the HMRC thinks that you have formed the Ltd company purely to avoid self-employment you will find yourself entangled in Personal Service Company Legislation.

5. Self-employed individuals engaged through a third party or intermediary

6. A commercial contractor that sits in the contractual chain offering driver services

7. Traditional umbrella – an employed short term worker contract

8. Hybrid payment models, where the worker is on a scheme which makes him self-employed for his status but chooses to pay PAYE taxes and NI.

9. There are also a few hangers on for offshore schemes which still exist despite new legislation because they are PAYE based.

Please note, some of these are supported by the HMRC, some of these are stood or sometimes misunderstood by them and one or two just make the taxman downright angry.

There is still no statutory definition of what constitutes a self-employed contract. Historically case law identifies the badges of employment being, personal service. Mutuality of obligation and control, which has now been redefined under supervision direction and control, these are the fundamentals of an employment contract.

BIG MISCONCEPTION – HMRC did used to concentrate on such things as provision of driver services only, or is there the supply of the tools of the trade, (that’s a vehicle to you and me), but that is (by current trend) not the be all and end all how it is looked upon. Good news for those who are unsure of whether the supply of cars is a flaw in their plan, bad news for those with ridiculously complicated systems of renting cars through separate companies with different ownerships (you know who you are).

A new HMRC team has recently been announced to “consider” the issues of “false self-employment”. Possibly this is the wrong question and it is time to take a wider look at general working practices and reconsider the underlying approach to tax and social security. For if there is a significant difference between the treatment of the employed and the self-employed, businesses are likely to “play the system”, trying to fit into the lowest cost, and most lightly regulated, structure. The one big clue is that the courts as (I have said many many times) have shown that the will support or condemn your engagement contracts subject to how far they reflect your actual working practices.

Finally, as I always point out, please don’t blame me or beat yourself up, if what I have said is either a revelation or makes you shout at the page, or for that matter seems overly confusing. The law and its interpretation is a shapeshifting beast, subject to each new precedent or tribunal decision. Governments and administrations change and realign their perspectives and therefore the HMRC (which is after all just a government agency) can also be subject to new targets and benchmarks at a whim.

What was right five years ago, is not always relevant today. It is important to keep up your compliance and revisit it at least annually. The information I have supplied is not necessarily right for your individual situation please always seek professional advice.