Paying a driver through their limited company: why section 44 usually says no

7 minute read · Updated 2026-09-09

A driver asks to be paid through his own limited company. The rate looks better for both of you. It is the most common way a driving agency walks into a tax assessment, so here is the rule.

Section 44 does not care about the company

Section 44 of the Income Tax (Earnings and Pensions) Act 2003, the agency legislation, says that where a worker personally provides services through an agency and is subject to supervision, direction or control as to the manner in which they do the work, the payments are treated as employment income and the agency must operate PAYE and Class 1 National Insurance.

It applies whatever entity sits in the middle. A limited company does not switch it off.

Is an agency driver under supervision, direction or control?

Almost always, yes. The transport office says which run, which vehicle, what time to start, which drops and in what order. The tachograph and the drivers' hours rules do the rest. HMRC's own Employment Status Manual uses HGV driver examples, HMRC watches the driving sector specifically, and an agency lost precisely this argument in the K5K Limited case in 2025.

The test is not whether control is exercised. It is whether the right to control exists. A driver who is very experienced and never told what to do is still under control if the client could tell him.

What it costs to get wrong

If you pay the company gross and HMRC later finds supervision, direction or control, you owe the PAYE and the National Insurance retrospectively, per driver, per week, with interest and penalties. Not the driver. Not his company. You.

The 2026 trap that looks like good news

From 6 April 2026 the thresholds for a "small" client under the off-payroll working rules went up: broadly, turnover under £15m, balance sheet under £7.5m or fewer than 50 employees, meeting two of the three. More clients are therefore small, and where the client is small the agency is not the fee-payer under Chapter 10 and the contractor's own company decides its status.

That reads like a relief and it is not. Chapter 10 stepping back does not switch off section 44. They are separate pieces of law with separate tests. "The client is small, so IR35 is not my problem" is the sentence that precedes an assessment.

What to do instead

Pay drivers PAYE. Build employer's National Insurance and holiday pay into the charge rate. You will lose the occasional driver to an agency willing to pay his company gross, and that agency is carrying a liability it has not priced.

If you genuinely believe a particular engagement is outside supervision, direction and control, then document it: a written assessment for that assignment, the client confirming in writing that it does not direct the manner of the work, and an accountant signing it off. For ordinary agency driving work you will rarely be able to write that honestly.

Before you rely on this

This is a guide, not legal advice, and it is free because the law behind it is free. Every source we used is linked in the text so you can read it yourself rather than take our word for it. Where a decision turns on your own circumstances, and two of them below do, pay a solicitor once. It is cheaper than the alternative.

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