Fraud involving the tax status of lorry drivers is becoming a serious concern for the transport industry, the Road Haulage Association (RHA) warns.
Haulage drivers are increasingly being paid as if they were self-employed rather than through PAYE, the RHA says. That is likely to be correct if the driver owns the truck but if the truck belongs to someone else the correct status is PAYE, regardless of where the payment is coming from.
Dodging the correct tax code means that the employer evades income tax and National Insurance and also a raft of drivers’ rights under employment law. This gives an unfair advantage over firms that work within the law.
“With a growing driver shortage in the UK, this means that law-abiding hauliers are losing drivers and losing work to firms and drivers who break the law”, said RHA chief executive Richard Burnett. “The practice is also damaging to law-abiding driver agencies, who are losing drivers to less reputable competitors. Incorrect tax status in not a new issue but it has become a much more serious concern this year.”
The RHA suspects that there are several reasons for the increase in fraud. It may be that some firms simply want to cut corners, while others are being poorly advised. It is clear that a growing number of drivers think they can set up a business and charge a higher net rate by evading their due tax.
Scams are rife among drivers who come to the UK from Eastern Europe for a limited period; but the fraud is far from limited to these drivers, the RHA says. The only way to be self-employed as a lorry driver is to be driving your own lorry – never someone else’s.
Richard Burnett continued: “Our concerns are for the health of the UK haulage sector. It is coming under increasing pressure to break the rules and hauliers who may inadvertently be paying drivers off payroll may face a heavy claim for back tax and penalties of up to 70% of the tax and NI arising. Also, individual drivers could face bankruptcy if they evade tax payments and then HMRC enforces its rules.”
The Exchequer is, of course, being defrauded of substantial tax revenues at a time when George Osborne says he wants to improve tax compliance. The RHA has raised the issue with HMRC, which agrees that the RHA’s interpretation of the rules is correct.
“The growing illegality is of real concern to our members who all want fair competition. This should be of concern to ministers and we look forward to effective enforcement action,” concluded Richard Burnett.