HMRC win case on self employed lorry drivers

Those who work in the road haulage industry will be well used to engaging with self employed lorry drivers (or indeed being such a person). Obviously such drivers are not on a business’s payroll and do not have PAYE and NIC collected like employees.

However, HMRC have just won a case to say that “labour only “ lorry drivers were employees NOT independent contractors and should have been subject to PAYE and NIC.

The business which lost against HMRC was a transport business which provided haulage services, run by Mr Dhillon.  It had a pool of potential drivers of its lorries. The drivers did NOT provide their own lorries so were “labour only” (which is perhaps a critical difference between this case and other engagements).  There were no written contracts between the business and its drivers. Mr Dhillon would be told by his customers how many lorries were needed for deliveries and where the loads needed to be transported and Mr Dhillon would then contact drivers from a pool of named individuals and offer them a particular delivery job. They were paid a fixed amount per shift if they accepted, and if they refused Mr Dhillon would ask the next person on his list. Drivers on the list could work for other people and could remove themselves from the list without any notice period.  Interestingly, (but still not enough to convince the Tribunal), a driver who accepted Mr Dhillon’s offer of a delivery job could substitute his services for those of another driver (as long as the second driver was “okayed” by Mr Dhillon’s customer). If this happened Mr Dhillon would pay the original driver the agreed fixed fee and the original driver would then pay his substitute by personal agreement between themselves.

As is quite usual in status cases, the facts did not consistently point in one direction. The fact that the drivers operated without supervision and had a right to substitute other drivers in their place pointed to self-employment.  But there was a lack of evidence that the drivers were in business on their own account, and quite prescriptive rules for the performance of the deliveries imposed by the business pointed to employment.

Overall, it was held that there was no evidence that the drivers were running their own businesses (with the risk, rewards and trappings associated with that); that the terms the drivers chose to accept (or not) were non-negotiable; and that Mr Dhillon was clearly “the boss” in the relationship (with a traditional master/servant employer/employee relationship).  The Tribunal concluded that the drivers were essentially employed ‘day labourers’ and HMRC won the case.

The case was clearly fact specific (and not all engagements will have these facts) and it may be appealed so ultimately the decision in HMRC’s favour may be overturned.  But employment status is a very grey area and one which is lucrative for HMRC so they may, in the meantime, take this case as an excuse to challenge more lorry driver situations.  It is therefore well worth looking over your own arrangements, reviewing the situation and seeing if your own drivers are correctly treated OR if anything can be done to strengthen the case for self employment rather than employment.

There is an HMRC self employment “tool” available online called the Employment Status indicator (ESI).  This can be used to input the facts of an engagement and it will give a decision as to whether the engagement should be treated as employed or self employed.  Bear in mind it is biased towards certain factors on which HMRC place perhaps unduly heavy regard, which may skew the end result.  But if the ESI tool concludes that the engagements you are reviewing are self employed (not employed) it can be printed off and keep as contemporaneous evidence that you have treated the engagement correctly which will be vital in a dispute with HMRC.  You can also use it to get a feel for what needs to change with an engagement in order for it to be clearly self employed, which can also be useful.

If you have any queries or concerns about the above, please contact Dean Johnston or Kathryn Brown on 01228 530913.