Gary From Eazitax’ s State of The Union Speech

Driver status has changed for good, or has it?

The tale of driver or worker status in the modern world began in 2016. Two Uber drivers, James Farrar and Yaseen Asleem, took Uber to an employment tribunal on behalf of a group of drivers. Uber treated these drivers as self-employed, but they wanted to be classified as workers. They were successful.

Uber’s appeal against the tribunal’s decision was dismissed… Undeterred, Uber took it a step further, appealing at the Court of Appeal – dismissed again – and then most recently at the highest court in the land: The Supreme Court.

A landmark moment.  Despite the Supreme Court finding in the drivers’ favour, Uber was reluctant to admit defeat.

After some time, Uber boss Dara Khosrowshahi made a public statement. He announced that:

“drivers would receive holiday pay, pension contributions and the National Living Wage”

This would seem to be similar to the ‘employment plus package offered by Hermes (in partnership with the GMB).

Recently, a pair of Addison Lee drivers took the private-hire behemoth to an employment tribunal. Just like with the Uber tribunal, the drivers wanted to be classified as workers. They won.

Addison Lee appealed the decision but was dismissed immediately. The judge cited Uber’s failure at The Supreme Court as evidence of the pointlessness of taking their appeal any further. 

Who’s Next? 

Despite the sophisticated technology of companies in this space, most gig economy companies engage drivers or workers in a similar way. That means that more drivers from companies like Uber and Addison Lee will likely come forward. Addison Lee’s appeal got shut down a hell of a lot quicker than Uber’s did. Does this mean the next company’s appeal won’t be given the light of day?

Drivers can get a lot of money! (if they want to take Uber on in the courts)

London firm Keller Lenkner, which represents over 9,000 Uber drivers, believes they can realistically get up to £12, 000 for each driver.

Law firm Leigh Day, which represents more than 100 Addison Lee drivers, believes thousands of drivers could be entitled to tens of thousands.

The victories of the Uber and Addison Lee drivers are moral, not financial. Their achievements are impressive, but compensation will only be given if drivers take action to bring a claim.

Uber didn’t actually listen, and no one can really make them

The most significant part of The Supreme Court’s ruling was absent from Uber’s most recent announcement. Lord Leggatt’s judgment outlined that ‘working time’ wasn’t limited to trips only, as Uber has argued, but any time the driver is logged into the app and ready to accept trips. 

Boss of the TUC union body, Frances O’Grady, accused Uber of “cherry-picking” from the ruling, which said Uber should consider its drivers as workers from the time they logged onto the app.

I think O’Grady is right. Uber chose to ignore part of the judgement, and there doesn’t seem to be a way to make them listen.

Some pundits believe nothing will actually change

Most experts believe that some businesses and drivers will take notice, and there may be an increase in claims. However, every employment case is ultimately decided on its own merit.

In fact, gig economy companies will likely claim that they aren’t Uber and will accuse courts of unfair treatment if their outcome is similar. On paper, two gig economy businesses are never exactly the same, even if drivers or users obtain jobs in the same way.

The judgement essentially tells other companies how to avoid meeting the same fate as Uber. We are likely to see further skirting around the rules but in a more sophisticated way.

In terms of companies having to pay holiday, pension contributions and National Living Wage, they may not even bear the brunt of these added costs. These will likely be passed on to the customers. When New York City’s minimum wage law came into effect in 2019, Uber simply raised its prices in the city to remain profitable.

Additionally, with the classification of ‘worker’, Uber and Addison Lee drivers are not entitled to sick pay.

Does HMRC Needs to Show Its Teeth

Aside from the compensation that drivers are owed, it is time for HMRC to take on the score of a lifetime. If no action is taken, HMRC risks losing all credibility and will be seen as focusing on squeezing the little guy instead of going after the real crooks. If HMRC can get Uber to cough up, then Uber drivers will have more confidence claiming against the tech behemoth.

(with thanks to technical check by Rebecca Walker from HQ35)

Gary, when are we making tax digital?

As pioneers of MTD (did we mention that we were chosen as the first accountants to take part in the scheme?) it’s been something we’ve been engaged in from the very start. Unfortunately, the whole scheme has been, in true HMRC fashion, marred by delays and confusion.

Here’s what we know as it stands today.

MTD VAT:

MTD VAT is being offered to all businesses voluntarily registered for VAT for their first VAT return period starting on or after the 1st of April 2022.

HMRC has reported that around 100,000 businesses that should already be complying with MTD VAT have still to sign up. HMRC recently sent out a chase letter. It has the data on who isn’t filling out their VAT using the correct method and wants as many businesses as possible to be ready to go fully digital.

Alongside HMRC’s new record-keeping and MTD filing requirements for VAT, there is also a new set of late filing and late payment penalty rules. The new rules were put into law by the Finance Act 2021. The penalties now work around filing obligation dates, imposing penalty points for when a business misses a filing obligation date.

Points don’t mean prizes, they mean fines. But good behaviour can go some way to getting rid of points over time.

MTD Self-assessment: 

Unlike MTD VAT, the start date for MTD self-assessment is in secondary legislation. Following a consultation published late last year, the start date is almost certainly going to be 6 April 2023 and will apply to unincorporated businesses and landlords with total business or property income above £10,000 per year. Quarterly reports are likely to require quarterly totals under headings following the self-employed pages of the traditional ITSA tax return.

The first accounting periods to be affected by MTD ITSA will be those beginning on or after 6 April 2023. The first quarterly reports will be those due for businesses using financial year accounting, so for the quarter 6 April 2023 to 5 July 2023.

Quarterly reports will be needed for each business a taxpayer has, which includes each property business, and also a rent-a-room business.

Note that the pilot for MTD ITSA is ongoing but remains fairly restricted. It is currently only to taxpayers who are:

• UK resident
• registered for self-assessment with all returns and payments up to date
• a sole trader with income from one business only or a landlord who rents out UK property (or both).
• Not reporting income from any other source.

People often ask me how taxpayers will report income other than from trading and property. HMRC’s expectation seems to be that most MTD software will allow non-MTD income to be reported. It is also building a new service to allow non-MTD income to be reported separately.

What’s the $64K question?

Oncoming threats to PH Operators are?

Answer: ‘continuity’ in private-hire and driver retention. 

In England and Wales, Tax checks will be conducted on any new applications for private hire licenses. If there is a time to take the tax of your drivers seriously, it is now. Contact us about this now.

HMRC will introduce checks on tax registrations for all renewed applications in England and Wales. This includes applications to drive taxis and private-hire vehicles, and applications to operate a private-hire business. This is being called ‘conditionality’, as entry to the private hire trade (through licensing) is now conditional on tax checks.

Licensing bodies and local authorities will need confirmation from HMRC that applicants have passed the check before being given a renewed license.

How will it affect the private hire industry?

HMRC is doing this as a response to the hidden economy, which they believe exists as a result of a confusion and a lack of understanding about tax obligations. Making access to licenses conditional on a tax check certainly makes it more difficult for people to enter or remain as part of the hidden economy. It also creates a more transparent industry. 

According to HMRC, licensing bodies will signpost first-time applicants to HMRC guidance about tax obligations. This is to obtain confirmation that they are aware of what is expected of them before considering the application.

The tax check will be carried out by providing enough information for HMRC to be satisfied that the applicant is aware of their tax obligations and willing to adhere to them. If the licensing body is unable to obtain confirmation of tax check completion for 28 days, licenses will either be denied or will be allowed to expire. 

Confused? You will be, or come see our talk at the PHTM Expo 2021

Gary Jacobs

The Eazitax Group