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How IR35 Legislation is Affecting the UK’s HGV Driver Shortage

Recent reports indicate that the UK’s HGV Driver Shortage has reached over 100,000. There are a number of reasons cited for the substantial shortfall, including Brexit, COVID-19, an aging workforce with many drivers retiring, and Read more...

Katherine Zangana

Senior Associate

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Recent reports indicate that the UK’s HGV Driver Shortage has reached over 100,000. There are a number of reasons cited for the substantial shortfall, including Brexit, COVID-19, an aging workforce with many drivers retiring, and also the recent changes to the IR35 rules (also known as the “off-payroll working rules”).

According to a recent survey of hauliers by the Road Haulage Association, over 53% believed that a key reason for the driver shortage was down to the new IR35 rules that were introduced in April 2021. Furthermore, industry leaders have suggested that the changes to the IR35 legislation have led to a decline in earnings by 25% for those drivers that had changed from being self-employed to employed to protect their income as much as possible following the introduction of the new rules.

What is IR35?

The IR35 rules govern the National Insurance Contributions (NIC) and Income Tax Contributions of ‘off-payroll workers’. These are workers who are not classed as employees, but who provide services to clients via their own limited company or another form of intermediary (personal service companies).

Historically, contractors in the private sector have been responsible for determining their own status. However, since the implementation of the IR35 rules in April 2021, medium and large-sized private sector businesses are now required to determine whether they apply to their consultants or contractors and make the relevant tax payments.

How has IR35 Impacted the HGV Driver Shortage?

The changes to IR35 has meant that many agencies supplying contracted staff to the industry have become insolvent or have had to let drivers go because the associated tax rise (equal to £5-6 an hour, according to the Road Haulage Association survey) has left them unable to sustain a profit. Furthermore, a combination of IR35, COVID-19 and Brexit has also made returning to work on the Continent much more appealing to many European HGV drivers.

Why is IR35 Important?

While it may pose a challenge to your business or employment status, it is crucial to ensure that you comply with the IR35 rules. If you do not, you could be forced to pay backdated taxes plus interest and possibly be hit with a substantial penalty.

Our Employment team can assist you with any questions or concerns you may have about the IR35 rules and how they impact you or your business. If you have an employment matter that you would like to discuss, please do not hesitate to get in touch.

If you would like to discuss any of the topics raised in the above article, please call us on +44 (0)20 7936 8888, email on enquiries@lawstep.co.uk or contact a member of the team below.