Taxi Driver Online

I'm not too sure if that's a strong indicator, since I think the test is more often expressed in whether or not the person risks capital, not just that they may end up not getting paid for their labour.

For example, if you said that any driver who could end up not being paid for their labour - most obviously if the passenger did a runner - was automatically self-employed then clearly that would be the end of the story for the vast majority of the trade, but in reality I don't think it is.

In reality it comes down to a myriad of facts pertaining to each particular case and these facts being weighed up against existing case law, because as I've said the test is enshrined in decided cases rather than legislation.

Thus the guidance used by HMRC can only be a distillation of factors that have decided the various cases and then applied to the trade, and clearly this application can always be challenged. And I think a particular problem with the trade is that there are no decided cases relating to the trade per se (in the higher courts, at least), and thus it's difficult to use principles derived from other occupations in relation to the trade.

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Taxi Driver Online
www.taxi-driver.co.uk

Below are summary sections taken from a couple of leafets used to determine employment status. The first is from the worker's perspective, while the second is from the perspective of those hiring them.


Employed or self-employed?

Employee

If you can answer 'Yes' to all of the following questions, you are probably an employee.

Do you have to do the work yourself?

Can someone tell you at any time what to do, where to carry out the work or when and how to do it?

Do you work a set amount of hours?

Can someone move you from task to task?

Are you paid by the hour, week, or month?

Can you get overtime pay or bonus payment?



Self-employed

If you can answer 'Yes' to all of the following questions, it will usually mean you are self-employed.

Can you hire someone to do the work for you or engage helpers at your own expense?

Do you risk your own money?

Do you provide the main items of equipment you need to do your job, not just the small tools many employees provide for themselves?

Do you agree to do a job for a fixed price regardless of how long the job may take?

Can you decide what work to do, how and when to do the work and where to provide the services?

Do you regularly work for a number of different people?

Do you have to correct unsatisfactory work in your own time and at your own expense?

http://www.hmrc.gov.uk/pdfs/ir56.htm

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Common indicators of employment

The contractor has the right to control what the worker has to do - where, when and how it is done - even if the contractor rarely uses that control.

The worker supplies only his or her own small tools.

The worker does not risk his or her own money and there is no possibility that he or she will suffer a financial loss.

The worker has no business organisation, for example yard, stock, materials, or workers.

The worker is paid by the hour, day, week or month.


Common indicators of self-employment

Within an overall deadline, the worker has the right to decide how and when the work will be done.

The worker supplies materials, plant or heavy equipment needed for the job.

The worker bids for a job and will bear the additional cost if his or her bid is too low.

The worker has a right to hire other people who answer to him or her and are paid by him or her to do the job.

The worker is paid an agreed amount for the job regardless of how long it takes.

None of the indicators listed above is conclusive. To make a decision on an individual case, you will need to consider all the details, and the overall situation. If you still find it difficult to decide, you should contact the Inland Revenue for advice.

http://www.hmrc.gov.uk/pdfs/ir148.htm

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Taxi Driver Online
www.taxi-driver.co.uk

No disrespect TDO, however that information detailled as above is very old hat indeed.

It is something the government tried to implement with regards to the courier trade quite a few years ago and I might add were very unsuccessful in doing.

We I believe are talking primarily about VAT, not Income tax and if the former is calculated incorrectly then the the wrath of the latter will surely follow.

Therefore I shall detail for all intrested parties how this works, this is not my interpretation, it is fact.

Agent.

You only charge the customers VAT on the extra you charge to account customers, your main income comes from the drivers and therefore that is where you charge your VAT, to the drivers they are therefore self employed and there is no problem, if you rent them a vehicle then you also charge them VAT on that. In theroy it is not that complicated all providing you don't end up with dick of a driver who registers himself for VAT

Principle.

You charge all your customers VAT on all fares and pay the drivers an hourly rate.

Agent & principle.

you have self employed and employed drivers and charge the VAT to the customer according to if the driver is self employed or not.

These are the regulations as detailled within the VAT guidelines, nothing dodgy here, unless of course you as an operator can not be bothered to seperate the two in relation to billing the customer and then charge VAT on all account work then you are really deeply in the brown stuff, if at the same time you claim your drivers are self employed.

The biggest problem here is that I could name for example ten operators who do it incorrectly that I know and two who do this correctly, there is no grey area for interpretation here, never has been as far as the VAT office is concerned, unless the operator is charging the VAT incorrectly.

Sorry to sound like a smart ass but if you do not read the regulations correctly and as a result get caught then so be it. You will only get what you deserve.

Regards Eric

But surely the point is that you're assuming the employment status of the driver rather than actually applying the relevant tests? I mean, it's like saying that driver x is employed thus he receives his wage after deducting PAYE whereas driver y is self-employed thus he pays his own tax directly to HMRC, whereas if the test was properly applied then one or both drivers might be being miscategorised? Any legislation that I know that relies on the employee/self-employed distinction merely repeats the categories and relies on the case law to decide who falls into each category - ie it's never actually been legislated for.

I don't know the details of the interaction between income tax and VAT, but what I'm quite sure about is that if HMRC considered each driver separately then many would be recategorised as employees rather than self-employed, and while this would clearly have ramifications regarding the payment of income tax, I'm quite sure it would also have ramifications as regards VAT as well, and indeed that's the point made by Andy7 in his original post.

The stuff posted above is indeed 'old hat', since the test is based in common law (I think the whole thing has basically evolved from the master/servant relationship) and has been around since the year dot and indeed some of the prominent cases date from several decades ago.

However, the point is that many in the trade are not really aware of all this and self-employment status for drivers is as accepted as readily as that the sun will rise in the morning and set in the evening.

And Andy7's post certainly seems to indicate that the authorities may be taking more interest in the matter - that's why I posted the information.

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Taxi Driver Online
www.taxi-driver.co.uk

And it's interesting to note that the test mentioned by Andy7 at the outset is merely one of the more general 'old hat' tests that I posted above, but applied to the more specific environment of the taxi/PH trade.

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Taxi Driver Online
www.taxi-driver.co.uk

I am now trying to get VAT office to send me the stuff on Email, and when they do, I will Email it to TDO so it can be posted on here.

The point that is annoying me, is that we have traded the way we are for 20 odd years. We have in that time, had one VAT In Depth examination, and audit vists roughly every five or six years. Until IR and VAT amalgamated, all visits from both organisations passed us off as fine (in terms of the system we operated).

Now that they have some test cases (and I am now in possession of some of them), the rulings are reasonably clear, that although there has been no definitive change in the specific legislation for our trade, there has however, been some change in the Court's "interpretation" of the existing laws. They [the Courts] are leaning more towards interpretation as employed (seemingly, to tackle the black economy issue that has been a feature of some operators).

Andy 7

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There is Significant Unmet Demand for my Opinion.

Took me ages to find this link.


http://customs.hmrc.gov.uk/channelsPort ... t#P39_2853

Hope it is useful

Regards Eric

I think the significance of this for the current debate is that it assumes that the driver's employment relationship with the office is cut and dried, and of course in the normal course of events it's taken as read.

But of course when the employment relationship is looked at, as seems to be happening on a more widespread basis, then it can potentially have fundamental implications for the VAT position as well because the assumption made on the webpage no longer holds.

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Taxi Driver Online
www.taxi-driver.co.uk

TDO Wrote:



Please elaborate, I do not understand what is being said here.

Many thanks

Eric

What I mean is that the analysis assumes that the question of whether the driver is self-employed or employed is cut and dried, in which case the VAT analysis as per the webpage is what will apply.

But if the employed/self-employed categorisation is challenged then this would clearly affect the VAT ramifications.

I'm not saying anything that hasn't been said earlier, but I think that what it comes back to is that what is currently accepted as a self-employment scenario may not in fact remain so, and clearly this would change the VAT treatment as outlined on the webpage.

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Taxi Driver Online
www.taxi-driver.co.uk

Ah ha!!!!

We are finally getting somewhere here

of course the two are connected how could they not be

AND if the former is being administrated corecty how can anyone's status possibly be confussed

But that's the whole point, surely - who's to say that it's being correctly administered?

I think the point is that the Inland Revenue for years accepted that it was being properly administered, but now they seem to be taking a greater interest and when they apply the relevant tests perhaps the self-employment status of some drivers becomes a bit shaky.

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Taxi Driver Online
www.taxi-driver.co.uk

What has haapened here IMHO is the lines have got blurred by the operator, whilst we have been busy building our empires and as time has gone on we have wanted more control, now when with that control comes the headaches of this interpretation we quite simply do not want this.

All I can say is that if the operator is following the requirement, yes they are requirements, not guidelines, of both the VAT and the IR in relation to the status of the driver then all will be fine.

One has to have the balls to have the courriage ( wish you had a spell check) of your own convictions here, which one can not do unless the letter of the law has been followed, which in most cases it has not been.

So who do I think should worry about this

Operators who are clearly engaging drivers who should be employed and they are attaching a self employed status to them.



The legislation and I see this as very straight forward and cut and dry.

I simply can not see where the problem is, unless of course it is being done incorrectly.

Well I think that's the point; there's no legislation on the classification of employees/self-employed - it's all in case law.

A week or two ago I referred to an HMCE webpage on questions that might be asked in arriving at the correct classification, and if you apply these questions to the trade then I don't think it's a case of things being cut and dried. Moreover, these questions are essentially just a bit of basic guidance based on the case law, which complicates things considerably.

Again, the point seems to be that in the past the issue has been treated as cut and dried because the kind of approach taken on the HMCE webpage has never really been taken - the classifications have been accepted without considering the question fully.

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Taxi Driver Online
www.taxi-driver.co.uk

I would say the only reason the IR are taking more of an interest is because they feel that they could be getting more money than they currently are with regards to NI contributions & Tax payments.

Example:

Person A (self employed) earns £20k per annum but only declares £10k and can modify his books to show he has only earned 10k.

will pay less tax & NI than:

Person B (Employed) who earns 20k per annum in wages paid via the company will have all documented records of actually earning that amount and will therefore be paying more on NI and Tax than Person A who has only declared 10k.

I could be wrong but just putting my opinion across as I have always wondered if I would technically be employed or self-employed.