HGV Employee Taxation - Don’t Get Confused

The RHA (Road Haulage Association) and HMRC are working hard to try and correct some common misconceptions about the taxation of self-employed HGV drivers with haulage contracts.

It’s recognised by all parties that misunderstandings are possible, and that might leave both employers and the HGV drivers concerned as well as liable to substantial back-charges - and possibly fines.

Here we’ll take a quick look at some of those misconceptions that are often associated with haulage contracts.

Employee or Not

The first thing to note is that the National Insurance contributions due on an employee are typically required even if you are self-employed while driving for others.

• You can be considered to be the employee of another company even if you have no contract of employment with them. You or they will need to pay the appropriate tax and NI on your employment. Having haulage contracts in place does not, in itself, make any difference to this principle.

Multiple Companies

A common misconception is that if you’re self-employed and work for several other companies, you can’t be deemed to be an employee.

• You can be considered an employee even if you’re working for more than one company/customer.

Service Companies

This one is an old and confusing one relating to haulage contracts.

• Setting up a service company does not exclude you from being considered as an employee in tax and NI terms.

Vehicle Ownership

Another area that causes misunderstandings is that of vehicle ownership. This applies irrespective of whether you own, lease or are financing your vehicle yourself.

• Being an owner-driver is irrelevant in terms of being designated as an employee by HMRC.

Grey Areas

It is true that sometimes a self-employed business owner can be in the ‘grey areas’ surrounding some of the taxation definitions. As a result, there may be legitimate instances where it’s difficult to say for certain whether you will be considered by HMRC as an employee or not.

As a general rule, HM Revenue & Customs will typically incline towards designating you as an employee even in grey area cases. The bottom line is simple: if you are in doubt you should check your exact position with the taxation authorities or a fully qualified taxation consultant with experience in haulage contracts and taxation law.

Try to avoid guessing and making assumptions.

When Am I a Company?

Unfortunately, the legal definitions surrounding starting up a company and HMRC’s view aren’t always in synch.

• Simply setting up as a limited company does not remove the possibility of HMRC designating you as a de-facto employee of another company.

In order to be considered to be a fully independent legal entity and not an employee, you may need to have several or all of the following (not a comprehensive list):

1. A legal company
2. Audited accounts
3. Your own vehicle and business operating licences
4. A commercial premises
5. A sales ledger showing you are selling your services to multiple customers
6. All appropriate tax registrations
7. Various forms of professional indemnity/liability insurance and if you have others working with or for you, that you are paying their taxation and NI through PAYE etc. you might also need employer’s liability insurance.

Summary

It’s fair to say that this area has historically proven to be hugely confusing to some self-employed HGV drivers. It’s not been unknown in the past for HMRC themselves to be slightly confused on this subject.

However, all that is now past us and the rules and applications are usually clear.

The RHA’s advice is excellent, as is that of HMRC. It’s definitely worth remembering when you’re thinking about new haulage contracts.