How IR35 tax changes fuelled the lorry driver crisis

A change to the tax code – rather than Brexit or the pandemic – has prompted truck drivers to leave the industry in huge numbers, iNews analysis shows.


The impact of IR35 changes has been felt by more than just HGV drivers, with everyone from IT contractors and even agency nurses losing out due to the adjustment. A survey of 250 contractors from business analytics firm Simply Business showed that 91 per cent reported that the change will affect their bottom line.


In April of this year, the Government changed the rules which determine whether someone who works for a company is classified as a contractor or an employee.


These rules, called IR35, or off-payroll working rules, used to allow truck drivers to decide whether they were contractors or employees. Many drivers would classify themselves as contractors, which left them without the protections of permanent employment – but with a potentially reduced tax bill.


At the same time, agencies that hire drivers and large trucking companies tacitly endorsed the practice, since the companies could avoid paying employers’ National Insurance contributions or giving contractors employee benefits.


But changes to the rules mean that employers, rather than drivers, are required to decide who is an employee and who is a contractor – with financial consequences if they are mistaken in the eyes of HM Revenue and Customs (HMRC).


It has led to a wave of drivers abandoning the industry as they see their effective pay fall.

While Brexit has been cited as a factor in HGV driver shortages – alongside the pandemic and complaints over poor working conditions – IR35 is seen by many as having had a bigger impact on the crisis. European drivers are among those leaving the industry – or the country – as without the tax breaks they see little reason to stay driving in the UK.


Driver David Foster said: “I work for a company that lost at least 250 drivers due to the tax changes. If you’re self-employed you’re making £1,300 a week, when you’re classed as an employee your down to £650-700 a week, which is a massive reduction. European drivers have come in because of freedom of movement and now they’ve all gone back home because of this.


“From December when Brexit came about to April we had no shortage of drivers, the shortage only started once IR-35 kicked in. I voted for the Conservatives because there were no other options at the time, but the driver shortage was created by the Chancellor.”


Vacancies in the transport and storage sector rose almost instantly to its highest point after the changes were introduced, though vacancies had been steadily rising before that, except for a brief fall during the height of the pandemic.


The industry’s reliance on the IR-35 tax rules speaks to a wider issue of drivers being underpaid by large companies, with the state trusted to make up the shortfall through the IR-35 tax break.


Steve Finlay, who has been in transport his whole life, said: “I work for the one of the biggest truck companies in the Northeast. Up until recently the drivers who were driving Monday to Friday were on £10 an hour.


“You get more working on the tills on Aldi. Half of the places we go to the guy who’s loading the truck is on more money than the driver.”


Many drivers have left the industry because they can earn more money for less work doing almost anything else.


One former lorry driver, Steve Wright, said: “My mate started a taxi-business where I live, and they’re making twice as much as I earn. It’s a no brainer.


“I can be away from home all week, and the take-home pay is £600 a week. Most weeks you start on a Monday and you roll-in on a Saturday. I’m finished with it.”


Commenting on the rule-change, an HMRC spokesperson said: “The off-payroll working rules were designed to ensure individuals pay similar levels of tax regardless of the structure they work through. The changes in April 2021 do not introduce a new liability. They ensure the rules, which have been in place since 2000, are applied as intended.


"HMRC has offered extensive education and support to those implementing the changes, including tailored content to help the haulage and transport sector to comply. We proactively worked with transport industry representative bodies to understand their concerns and offered additional support to help with the understanding and implementation of the rules. We have also worked with cross-government partners to deliver an off-payroll webinar attended by over 40 industry representatives.”


Source: iNews