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The Government should consider the case for enabling online platforms such as taxi or delivery firms to operate a system equivalent to PAYE for self employed platform workers without affecting their employment status, according to a report on the gig economy from the Office of Tax Simplification.
today publishes its third paper on the platform economy and tax in which it suggests how to simplify and improve the tax experience of the increasing number of individuals who work on a self employed basis through online platforms.
Paul Morton, OTS Tax Director, said: “The development of the gig economy and new ways of working through online platforms has profound consequences for the employment landscape. At the OTS, we are concerned with the tax implications and how the experience, especially of individual tax payers, can be simplified. [This] would remove the administrative burden from these individuals, who can be some of the most vulnerable in the labour market and mean that they should not get an unexpected tax demand at the end of the year. It would also make tax collection more efficient.”
The report also calls on HMRC to focus on the development of guidance and to fully engage with technology developers to provide reassurance that digital applications are fit for purpose in submitting accurate tax data and returns as necessary. And it says HMRC should consider the case for establishing an app for the self employed to help them manage their tax affairs.
Chris Blundell, employment tax partner at accountancy firm MHA MacIntyre Hudson, said the PAYE could create two major problems. He said:“The proposals are specific to gig economy workers working for platforms like Deliveroo and Uber, but this won’t capture all self-employed workers and runs the risk of creating more discrimination in an already complex arena.
“Hairdressers, for example, are often self-employed via a chair or booth-rental model, and other businesses could be harder to classify. Cycle couriers may have their work allocated via a digital system, but would this count as a platform? What about taxi companies that don’t operate like Uber, but do nonetheless engage their drivers on a self-employed basis? The gig economy challenges stem from the definitions of employment status and these proposals would create a new classification, adding self-employed platform workers to the current definitions of self-employed and employed. A third definition is a new complication.
“The other key point is this system wouldn’t remove the tax administration burden from self-employed workers as the OTS’s proposal says it will. Their affairs would remain complex as, while tax would be deducted up front, they will still need to claim back tax paid on expenses via their tax return. For people new to self-employment, having to deal with preparing and submitting accounts, and making the right payments, can be something of a minefield.”