Q. What is IR35?
IR35 or “off payroll” legislation is the legislation that helps determine whether an individual would be deemed an employee for tax and NI purposes if they weren’t being paid via their personal services company (PSC / Ltd Company). The legislation itself has been around since 2000 and at its core, hasn’t changed significantly since then. It has always been the responsibility of the contractor (in this case, a Ltd Company Driver) to do their own assessment, and declare to the HMRC their tax status.
Q. What changed and why?
From April 2021, medium and large-sized organisations in the private sector became responsible for deciding the employment status of contractors for tax purposes. Previously, Ltd Company Drivers themselves were responsible for making this decision in these sectors and this change shifts the responsibility for this decision to the end user (client company). This ensures consistency with the public sector, where these arrangements have been in place since April 2017. The aim of the legislation is to ensure that two workers performing the same role for the same company work under the same tax scheme.
Q. Who does this affect?
You are affected by the changes to the off-payroll working rules (IR35) if: You are a Ltd Company Driver / Contractor who works through an intermediary, e.g. you own limited company, often know as a personal service company (PSC), and you provide your services to public sector organisations or medium or large-sized organisations outside of the public sector. A medium or large-sized organisation will have a turnover of more than £10.2 million, a balance sheet total of £5.1m and/or more than 50 employees.
Q. What does this mean for Ltd Company Drivers / Contractors?
Having carried out extensive due diligence across our clients within our driving network it has become clear that the standard position being taken across logistics industry is to no longer engage with contractors who operate via a PSC and will instead be requiring all contractors to move to PAYE. As a result of this Blue Arrow have made the decision to mirror our clients' strategies across the driving sector and any worker supplied to our driving clients will be engaged as a PAYE worker from April 2021. As a PAYE worker on assignment with the same client for 12 weeks or you are eligible for “Parity Terms” in both pay and conditions with the end clients permanent workers doing the same job. We have worked with all clients to establish the PAYE rates for all driving roles. This is in line with Agency Worker Regulations. Your local Blue Arrow branch will manage any changes to PAYE and keep you updated throughout the process.
Q. What are the features to PAYE terms?
Pay As You Earn is the standard form of worker taxation in the UK and offers a number of advantages over Ltd Company Terms in the form of additional benefits and conditions;
1. Any PAYE driver on assignment with the same client for 12 weeks or more becomes eligible for “Parity Terms” in both pay and conditions with the end client’s permanent workers doing the same job. This means that all former Ltd Company Drivers (with more than 12 weeks on assignment at the same client) will be remunerated at the same rate at the permanent Drivers, in many cases the provides a significant pay increase.
2. All PAYE Drivers accrue a minimum of 28 days paid holiday per year in addition to their hourly salary (more where working to parity terms).
3. All PAYE Drivers accrue 3% Employer Pension Contribution in addition to their hourly salary.
4. All PAYE Drivers have their National Insurance contributions paid ensuring they are eligible for a full state pension upon retirement.
All PAYE Drivers have SSP entitlement.
Q. What happens next?
We work with all clients to establish the PAYE rate for all driving roles. This is in line with Agency Worker Regulations. Your local Blue Arrow branch will manage any changes to PAYE and keep you updated throughout the process. If you have any questions in the meantime please reach out to your local Blue Arrow branch.