TAXING MATTERS ARE YOU EMPLOYED OR SELF EMPLOYED?
In this feature our guest accountant, Gary Jacobs, discusses some relevant tax issues pertinent to the trade. This month he examines whether you and/or your drivers are employed or self-employed.
In these stern economic times running your own taxi business is extremely taxing. A whirl of costs and operating expenses are magnified by having to pay over 13 per cent in employers Nation- al Insurance contributions and the fact that drivers are on the payroll irrespective of hours worked.
Employers often believe that because drivers pay their own tax and national insurance, they must be self-employed. But this is not necessarily so and the government have employment status indicators that ask relevant questions. For example: According to HM Revenue and Customs your drivers are:
PROBABLY EMPLOYED. IF... • You tell them what work to do, as well as where and when to do it.
• You can move the worker from task to task. • They’re contracted to work a set number of hours. • You pay them overtime pay or bonus payments.
PROBABLY SELF-EMPLOYED. IF... • They can decide where to provide their services, as well as when and how to do the work.
• You pay them a fixed price - it doesn’t depend on how long the job takes to finish.
• They can make a loss or a profit.
You can try to get round this problem with “Self Employment” con- tracts, but in reality there are taxi firms already reeling from court cases and many more are just waiting for that knock on the door. HMRC has for years turned a blind eye towards the employment status of professional drivers, but no more.
One sure-fire way that has been introduced to the industry is: Payment companies. These run drivers as sole traders, but paid by the operator/proprietor through a separate Company. The benefits for the proprietor/operator apart are of course saving money on employment costs including 13.3 per cent Employees’ National Insurance, and running a payroll department!
HOWEVER, THERE ARE BENEFITS FOR THE DRIVER: • less red tape and paperwork
• more opportunities to move from contract to contract • easier tax returns • No VAT payments (if they are not VAT registered).
Click..
Look...Find... your next used cab
Just click PAGE 44 PHTM APRIL 2010
If you’re worried about your driver’s status now... HERE ARE OUR “TOP TIPS”...
1. Firstly, make sure your drivers are well and truly self- employed. This would mean that drivers could choose what style and age of car they drive and have the right to turn down jobs they didn’t want to do.
2. Ensure that they take money directly from the passenger, and invoice you for all their work undertaken.
3. Dig deep in your pockets and fight HM Revenue and Customs through a long and costly court process. (This is good for any- one with a few million lying about).
4. Close the doors of your business, never to reopen again, (I’m sure you can see the downside of this one).
Unfortunately this is not always good for the company bottom line! However as I said, with a Payment company, it still means you can advertise and recruit as before, but the payment company would invoice on your behalf. Drivers won’t have to pay the VAT on their circuit fees, which is covered by the payment company. Most payment firms will also do your tax returns for a very small fee, because they already hold all the information for you. The good news is that with a bit of effort and planning you can retain your self- employed workers.
For any questions regarding self employment or other tax matters ring Gary Jacobs on 0845 092 0141 or email:
gary@kapla.co.uk or see us on our stand at the Coventry Private Hire and Taxi Exhibition on 2 and 3 June
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