ESM11095 | Check Employment Status For Tax: Financial risk - Vehicle Costs

CEST asks ‘Will the worker have to fund any vehicle costs before your organisation pays them?’ or 'Will you have to fund any vehicle costs before your client pays you?'

We ask this question to see if you have significant financial risk from vehicle costs and if that could result in you making a loss from the contract, as this would be an indication of self-employment.

For further guidance on the financial risk questions see ESM11085.

If a worker must get a vehicle specifically for providing services, this could be bought, leased or through loans, then this falls within the ‘Yes’ category for CEST.

If a worker incurs significant extra cost for using the vehicle specifically to perform the duties of the contract, this falls within the ‘Yes’ category for CEST. This could be running costs for example.

For insurance to count as an extra cost, a worker would need to purchase a materially expensive policy that was significant in comparison to their income and was required to perform the duties of the contract.

If a worker already owned a car, gets another out of preference, is given money for it by the hirer or simply commutes to work, then this is the ‘No’ category for CEST.

EXAMPLE

Dave is engaged to perform a role that requires him to travel to customers.

• If Dave has to purchase a specific vehicle to meet the requirements of the engagement, unless the company reimburse Dave for the cost, this would be financial risk.

• If Dave uses his own personal vehicle and the hirer reimburses Dave for mileage and running costs, this is not financial risk. Dave is not exposed to financial risk as there is no additional cost borne by him.

• If Dave is required to buy additional insurance and the cost is significant in relation to the value of the contract, then the purchase of additional insurance is financial risk.

• If Dave has a personal vehicle which he could use but chooses to buy another vehicle for this task, the cost of the new vehicle is not financial risk. Dave was not required to buy a new vehicle and did so out of personal choice, so it is not fundamental to the task.

• If Dave must modify a vehicle to complete the work he has been engaged for and the cost to do so is significant in relation to the value of the contract, then this would be financial risk.

• If Dave decides to modify the vehicle out of personal choice or the cost to do so is insignificant compared to the contract value, this would not be financial risk.