The tax professionals at BDO have experience with CRA requirements and case law that can help trucking companies understand their role and responsibilities with respect to the Driver Inc. model. Our advisors can work with you to assist your drivers, and develop a tailored solution that aligns with your overall business plan.
Published: April 03, 2019
Updated: April 03, 2019
In the latter half of 2018, the Canada Revenue Agency (CRA) announced it would place increased scrutiny on Driver Inc., a commonly used payment model in the trucking industry.
The model involves drivers incorporating and being treated as independent contractors. Tax issues can arise, mainly for the driver, if:
- The tax authorities conclude that the relationship between the trucking company and the driver is classified as employer-employee, rather than as two independently operating businesses.
- The nature of the relationship between the trucking company and a driver is not clearly defined.
Driver Inc. does not have an established framework and multiple factors must be evaluated to determine a driver's appropriate classification.
What does this mean for trucking companies?
The CRA's crackdown on Driver Inc. has shone a spotlight on a long-standing tax compliance issue within the industry. Trucking companies should ensure they are aware of the risks, responsibilities, and conditions associated with this model, including fully understanding how drivers are classified.
Failing to properly protect and educate both themselves and their drivers could result in business disruption — and in some cases, financial penalties.
What are the next steps?
Owners and managers of trucking companies should consider the following steps to assess and mitigate potential risk factors:
Assess current relationships between the company and its drivers
Review current contracts with drivers who are treated as independent contractors to determine whether this classification is appropriate. Review all agreements for inconsistencies, as well as other documentation including invoices from the driver, the driver's income tax filings, and HST filings by the trucking company and driver.
Engage a third-party professional for a full assessment
A professional advisor such as BDO can assess the nuances of your organization's structure, employment and contractor agreements, and other factors, as well as the circumstances of your drivers.
Communicate to appropriate stakeholders
It's crucial to communicate responsibilities and next steps to all stakeholders. Develop clear documentation and policies that will support tax compliance for your organization, and help your drivers to understand their responsibilities.
Howard Kazdan
Senior Manager, Canadian Tax Services
Marcus Sconci
Partner, National Transportation, Warehousing and Distribution Leader
The information in this publication is current as of April 2, 2019.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.