Home Brexit Businesses urged to rethink IR35 strategy in light of HGV crisis

Businesses urged to rethink IR35 strategy in light of HGV crisis

by LLB Finance Reporter
28th Sep 21 3:48 pm

In light of the UK’s 100,000 shortage of heavy goods vehicle (HGV) drivers, which recently enforced IR35 reform is said to be one of the three main causes, along with Brexit and driver retirement, businesses have been urged to rethink risk averse strategies for managing these tax changes – a decision that holds the key to being able to attract flexible workers, explains IR35 specialist, Qdos.

On 6 April 2021, IR35 reform (off payroll working rules) was introduced in the private sector. As a result, medium and large businesses are now responsible for determining the IR35 status of contractors, which means to assess if a contract worker is genuinely self-employed (outside IR35) or works in a manner that reflects employment (inside IR35).

In addition to this duty being shifted from the worker to the end client, the liability has also been transferred, to whichever party is responsible for paying the worker – typically the end client or a recruitment agency.

Responding to the roll out of IR35 reform, some businesses have chosen to insist that all contractors operate on the payroll – a move which leaves many genuinely self-employed workers no choice but to become employees or work ‘inside IR35’, where they are taxed as employees but do not receive any employment rights in return.

The misclassification of IR35 status and firms’ risk averse approach attitude towards reform has contributed heavily to the UK’s ongoing HGV driver shortage, with many drivers now finding they have no option but to work on the payroll of the businesses that engage them.

Qdos CEO, Seb Maley said, “This is the first real high profile example of what not to do when it comes to managing IR35 reform, along with its wide-reaching economic impact. Far too many businesses that once engaged contract HGV drivers as self-employed workers have handed them an ultimatum – work on the payroll or have your contract cancelled. This has led to an exodus of drivers.

“Give genuinely self-employed people no option but to work as employees or pay tax as an employee, and the chances are, they’ll stop working with you. There are other factors contributing to the UK’s shortage of HGV drivers – ones perhaps less easily managed – but by rethinking needlessly risk averse IR35 decisions, firms would stand a much better chance of retaining the services of HGV drivers.

“The HGV crisis won’t be solved on IR35 alone, but through sound management, businesses could definitely alleviate the issues they’re experiencing and in turn, the problems the UK is facing as a result of this shortage.

“Other industries, whether financial services, manufacturing or energy, should take note of the current situation and ensure they have the processes in place to manage IR35 reform compliantly and continue engaging contract workers, who hold the key to labour market flexibility.”

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