Driver Inc as it’s called is all over the news as the Canada Revenue Service (CRA) promises to crackdown on those businesses using the self employed status to avoid paying taxes when working for someone such as another owner operator or company. The practice has been around a long time and has gone through many names such as “Driver Service” “Driver Inc” and the like. Apparently the issue came up at a recent trucking conference that had members of the CRA involved and the issue began to spread like wildfire. I have been talking about this for years in my business classes so it is important to understand the issue.
What is Driver Inc?
The name is not relevant because many companies use terms like ‘Driver Service” or a company could name themselves “Driver Inc” and be legitimate. The real issue is in the relationship between the driver and the company. The practice goes like this, a driver is hired by another operator or company and told they will be an independent contractor. The driver sets themselves up as a company on paper by incorporating and goes to work for the carrier. They avoid paying taxes by writing off expenses such as their vehicle to and from work, meals, and many other items entitled for write-offs by business owners. The issue is that they are only working for one person or carrier. You are operating as a business without really being in business. This is a common practice for carriers that are avoiding paying income tax and payroll taxes for employees.
This is a very grey area because many business owners have been doing it for a long time especially owner operators that have more than one truck under their personal fleet. I have seen in the past where an owner had up to fifteen trucks and all the drivers were operating in that manner. When questioned about it he mentioned he had been audited with no problems by the CRA. His books may have been in order but if those drivers had been audited they would have been found to be in violation if they had not operating in the proper manner.
Is it legal to set up your own driver service?
Going into business can be a very rewarding experience and something that many people will try during their lifetime, but it has to be done properly. There are no shortcuts in business and the penalties can be very steep for those that choose to work outside of the law. There are many issues to keep in mind when setting up a business, too many to talk about in one article but there are a couple easy ways to know if you are in business properly in the eyes of the CRA. I used to tell my students to worry about three things. Can you prove you have more than one customer that you work with? I always suggest at least three clients. Do you provide the tools for the job or are they supplied for you? Do you decide when you go to work and have the right to refuse work if you choose? Are your business expenses legitimate to do the work or To gain future work? If you would like to check out the actual requirements for the CRA click the link to view the pdf document outlining the requirements. https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4110/rc4110-18e.pdf
It is legal to set yourself up in business if done properly with legitimate clients and work, but it is much more than just incorporating a name. Drivers are an easy target for these types of situations because it is enticing to be in business and it affords more money in your pocket. In the long run however the driver takes on all the liability and is paying taxes that an employer should be paying. If starting a business do your homework on the requirements and do it properly, you’ll be glad you did!
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About the Author
Bruce Outridge has been in the transportation industry for over 30 years. He is an author of the books Driven to Drive and Running By The Mile, and host of The Lead Pedal Podcast. TTSAO also known as the Truck Training Schools Association of Ontario has certified member schools in the truck training vocation ensuring quality entry level drivers enter the transportation industry. To learn more about the TTSAO or to find a certified school in your area visit www.ttsao.com