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IR35 Reforms Delayed

HERE'S WHAT IT MEANS FOR OUR CLIENTS & DRIVERS

Government defers IR35 reforms in the Private Sector until April 2021


WHAT THIS MEANS FOR OUR VALUED CLIENTS:

On 17th March 2020, the Government announced that, in light of the current COVID-19 pandemic, the rollout of IR35 reforms to the Private Sector will be deferred to April 2021.

This is a relief in that we will be able to continue using Ltd Company contractors, which enables us to avoid the potential uplift in our driver employment costs that would have been caused by the IR35 regulatory changes. We can therefore postpone our discussions about increasing “post IR35” charge rates until early next year when we get closer to the new implementation date of April 2021.

In the meantime, there are a number of changes that are still proceeding in April, these are:

  • AWR Swedish Derogation contracts will be invalid from 6th April. From this point we will no longer be able to work around the AWR legislation so ALL PAYE agency workers will be entitled to Parity Pay after 12 weeks of working without a 6-week break. This means that if any of your agency workers are PAYE, either directly through our payroll or through an Umbrella company, we will have to make you aware when they qualify for Parity Pay and we will work with you to decide if you wish to engage that worker at Parity Charge rates.
  • National Living Wage will rise to £8.72/hour from 1st April. This is a £0.45p increase in base rate, which translates into a £0.59p/hour increase in our driver pay costs when we add on Holiday Pay uplift, Employer NIC, Employer Pension contribution and Apprenticeship Levy.

We will be in contact with all our valued clients shortly to discuss these matters further and look forward to continuing to work with you to support you through these difficult times.


WHAT THIS MEANS FOR OUR LOYAL DRIVERS:

If you are working through a Limited Company you can continue to do so for another year. Remember that, as a Director of your Ltd Company, you will remain responsible for paying your PAYE tax and National Insurance contributions and will be liable to HMRC for any underpayment.

Two other changes will take place in April, these are:

  • 1st April: the National Living Wage (NLW) rises to £8.72/hour
  • 6th April: the Agency Worker Legislation is being tightened up so that, without exception, ALL PAYE workers will be entitled to Parity Pay after 12 weeks working for a client without a 6-week break. Previously Parity Pay has not been rigorously enforced due to the common use of “Swedish Derogation” contracts but these will no longer be valid from 6th April.

We will therefore have 3 modes of engaging you with our clients:

  • Limited Company Contractor: where you and we benefit from lower tax & NIC payments, so the cost to our clients is reduced accordingly
  • PAYE Pre-Parity: where you have not yet worked the 12 weeks to qualify for Parity Pay rates and will therefore be paid the market pay rate
  • PAYE Parity: where you have worked the 12 weeks and qualify for Parity Pay rates. In this case you will be paid either the Parity Pay rate or the market pay rate, whichever is the higher.

The Limited Company model is generally only viable for LGV drivers, i.e. 7.5t to LGV1 drivers.

All other workers, these being van drivers, driver’s mates and loaders, will generally be on standard PAYE agency worker contracts.

The issue we will encounter is that often the Parity Pay and Charge rates will be higher than the equivalent Ltd Company rates. Our clients, who are under extreme financial pressure, will insist on us providing Ltd Company contractors or Pre-Parity PAYE workers in preference to more expensive Parity Paid workers. We may therefore have difficulty persuading our clients to accept more expensive Parity PAYE workers.

If you wish to start up your own Ltd Company, we recommend you do this through an FCSA accredited company so that you can be sure that you remain compliant. This will also mean that you can easily transfer to a PAYE Umbrella scheme in April 2021 when the IR35 reforms come into force.

We are still happy to pay you through an Umbrella Company, though, from 6th April, we will only work with Umbrella Companies who are FCSA Accredited, click here for the list: https://www.fcsa.org.uk/members/. The only exception to this rule is Shield Contract Services, who are in the process of gaining accreditation, and we have suspended registering new workers through them until they have achieved accreditation.

If you have any questions, please do not hesitate to contact your local branch.

 

Our IR35 WHITE PAPER is available to view here



BE PREPARED FOR IR35

WITH OUR 7 STEP ACTION PLAN

The rollout of IR35 to the Private Sector has been delayed until April 2021 in light of the Covid-19 pandemic. However, our 7 Step Action plan is still relevant and is designed to help you understand the steps required to ensure that hauliers are properly prepared for the changes in legislation come April 2021. Our hope is that this process will create greater transparency across the sector, bringing hauliers and agencies towards closer partnerships. 

READ THE FULL ACTION PLAN HERE

IR35 FOR DRIVERS

What IR35 means for you

Changes to the Government’s IR35 legislation will come into force in April 2021, preventing larger haulage companies from taking on drivers who work as Ltd Companies. However, if you are currently working through a Limited Company you can continue to do so for another year. Remember that, as a Director of your Ltd Company, you will remain responsible for paying your PAYE tax and National Insurance contributions and will be liable to HMRC for any underpayment.

Two other changes will take place in April 2020, these are:

  • 1st April: the National Living Wage (NLW) rises to £8.72/hour
  • 6th April: the Agency Worker Legislation is being tightened up so that, without exception, ALL PAYE workers will be entitled to Parity Pay after 12 weeks working for a client without a 6-week break. Previously Parity Pay has not been rigorously enforced due to the common use of “Swedish Derogation” contracts but these will no longer be valid from 6th April.

We will therefore have 3 modes of engaging you with our clients:

  • Limited Company Contractor: where you and we benefit from lower tax & NIC payments, so the cost to our clients is reduced accordingly
  • PAYE Pre-Parity: where you have not yet worked the 12 weeks to qualify for Parity Pay rates and will therefore be paid the market pay rate
  • PAYE Parity: where you have worked the 12 weeks and qualify for Parity Pay rates. In this case you will be paid either the Parity Pay rate or the market pay rate, whichever is the higher.

The Limited Company model is generally only viable for LGV drivers, i.e. 7.5t to LGV1 drivers.

All other workers, these being van drivers, driver’s mates and loaders, will generally be on standard PAYE agency worker contracts.

The issue we will encounter is that often the Parity Pay and Charge rates will be higher than the equivalent Ltd Company rates. Our clients, who are under extreme financial pressure, will insist on us providing Ltd Company contractors or Pre-Parity PAYE workers in preference to more expensive Parity Paid workers. We may therefore have difficulty persuading our clients to accept more expensive Parity PAYE workers.

If you wish to start up your own Ltd Company, we recommend you do this through an FCSA accredited company so that you can be sure that you remain compliant. This will also mean that you can easily transfer to a PAYE Umbrella scheme in April 2021 when the IR35 reforms come into force.

We are still happy to pay you through an Umbrella Company, though, from 6th April, we will only work with Umbrella Companies who are FCSA Accredited, click here for the list: https://www.fcsa.org.uk/members/. The only exception to this rule is Shield Contract Services, who are in the process of gaining accreditation, and we have suspended registering new workers through them until they have achieved accreditation.

If you have any questions, please do not hesitate to contact your local branch.

WHAT IS DRIVER REQUIRE DOING TO PREPARE FOR IR35?

  • We have analysed the legislative changes from the perspective of haulage companies and produced a focused Whitepaper to explain the implications for the haulage sector.
  • We have prepared a clear and concise Action Plan for our clients
  • We have approached all of our clients to warn them of the impending changes and to offer support preparing for these
  • We have produced an explanatory leaflet for our drivers and we are actively working with them to help them understand the impact IR35 will have on them and what we are doing to get the best result for them
  • Driver Require is a member of the REC Driver Sector Executive Committee and, in this capacity, we are lobbying the government, HMRC and regulatory bodies to get clarity on the proposed review and implementation of IR35 and to make them aware of the ramifications for the haulage and temporary driver recruitment sectors.
  • Further to this we are running an active PR campaign through a programme of press articles, conference presentations and interactive sessions with our clients, all to raise awareness of the challenges we will face and actions we collectively need to take to achieve the best outcome.

IR35, Brexit & The LGV Driver Shortage

“The following article was published in the Parliamentary Review in 2019 and describes “The Perfect Storm” - the driver supply shortage, combined with Brexit and the impending IR35 changes, all of which represent a threat to the continued supply of temporary drivers and to the haulage sector.”

What is IR35?

The Impact of IR35 on Hauliers

Contact

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