From April 2020, fleet operators that utilise temporary drivers in ad-hoc situations could be hit with additional costs of up to 30% when the new IR35 private sector tax rules are enforced.
HM Revenue and Customs (HMRC) implemented IR35 for the public sector in 2017, in a bid to ensure companies are paying sufficient National Insurance Contributions (NICs) and not avoiding doing so by utilising self-employed contractors that operate through their own limited companies.
IR35 will be brought in for the private sector too next year. Companies with over 50 employees and an annual turnover of more than £10.2 million will be required to assess the employment status of any contractor they use.
Kieran Smith, chief executive of Driver Require, recently spoke at length at Fleet Live 2019 of the impact of IR35 on fleets and the potential challenges of driver recruitment in the months and years ahead.
During his seminar, Mr Smith warned that the cost of using temporary fleet drivers could rise by 20% and up to 30% for higher volume contracts. This factors in the additional outlay of agency margins, as well as new NICs and income tax payments.
Mr Smith’s speech also touched upon the impact of driver shortages nationwide and how the UK’s impending departure from the European Union (EU) would further exacerbate this issue.
Smith believes the arrival of IR35 next year will force limited company contractors to switch to Pay As You Earn (PAYE) forms of commercial fleet employment.
“The increase in margins and shift from large volume, lower-variable contracts to lower volume, high-variability contracts means most agency contract charge rates will rise,” said Smith.
“It’s not going to be easy for either fleet operators or agencies to absorb these extra costs.”
Smith fears that some hauliers could be forced down the line of illegally utilising limited company contractors, supplied by agencies that are prepared to take the risk of being undetected by the taxman; something which he says will “undermine ethical operators and agencies” as a result.
Meanwhile Martin Colloff, head of client and network distribution at Hermes UK, also spoke during Fleet Live 2019 of the changing face of driver recruitment in the fleet industry, including the hurdles to overcome when recruiting – and retaining – commercial fleet drivers.
His seminar also touched upon Hermes’ recent recruitment drive for heavy goods vehicle drivers and how the commercial fleet sector can do more to inspire female drivers to get behind the wheel professionally.