HMRC & IR35: Mini Umbrella Crackdowns & New Regulations for DriversDecember 17, 2021
Regulation changes have recently altered things for some businesses and drivers in the transport industry. New legislation will bring in harsher measures to companies using mini umbrella models for payroll management. Meanwhile, HMRC have also changed the laws around drivers’ employment status, meaning that they are set to be included in IR35.
Clamping down on the Mini Umbrella
The umbrella company, which acts as the employer of the contractor or temporary worker, allows them to calculate all tax and business expenses per contract. But it has long been under scrutiny. This is because, whilst the model can have a few advantages, there are a number of non-compliant ‘mini umbrella’ models being operated there has caused been Widespread Condemnations of the system.
Indeed, the GLAA has called it “tax fraud”, whilst HMRC also warns against the risks of becoming involved with tax avoidance through using non-compliant umbrella companies.
And, when it comes to the Mini Umbrella model, HRMC is far more critical and considers it a fraudulent employment intermediary. In May 2021 they stated that:
“The fraud is primarily based around the abuse of two Government incentives aimed at small businesses – the VAT Flat Rate Scheme and the Employment Allowance. But this type of fraud can also result in the non-payment of other taxes such as PAYE, National Insurance and VAT.”
Therefore, it is of little surprise that they have changed their regulations to make it easier to investigate agencies utilising this system for payroll management. The new rules should make it easier to sway firms away from umbrella companies and towards More Effective Alternatives for Payroll. Overall, it adds greater responsibility on those involved with the model.
Boost for drivers’ employment status
Alongside these regulation changes was a clarification on the employment status of drivers within the transport industry. The new ruling on this states that if a driver is using a company vehicle, they are deemed to be employed (and therefore inside of IR35). This was made clear by parts ESM4210 and ESM4211 of the government’s Employment Status Manual.
As a result, employers in this sector will need to offer compliant PAYE Payroll Solutions for any driver that they have operating a company vehicle. This ruling, on top of the above legislation changes, highlights that the Mini Umbrella model will not be acceptable for paying drivers. Moreover, employers can no longer dodge National Insurance & pension contributions for their drivers through using such a system.
How can Hive360 help?
Not only can Hive360 provide a Fully Compliant Umbrella Alternative for Payroll Management, we also supply employees (including your drivers) with a Benefits App as standard. This means that you can outsource payroll without legal issues, whilst simultaneously lowering costs and improving your workplace environment.