The OTS has recognised that the development of the gig economy and working through online platforms has had profound consequences for
the employment landscape. Their paper is concerned with the tax implications and how the experience, especially of individual tax payers, can be simplified. It offers a number of suggested improvements, in particular that government should consider whether online platforms could operate a system equivalent to Pay As You Earn, deducting tax from earnings and thereby taking responsibility for fulfilling the tax obligations of their workers.
This would not change the employment status of the platform worker. The idea of ‘PAYE for platforms’, which the OTS believes has not been suggested before, would be optional. However, for those who chose it, it 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 key question being addressed is how self employed workers can be provided with as simple an experience as employees in relation to their tax affairs and the OTS offers a possible solution.
The OTS paper concludes that:
- 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)
- HMRC continue to focus on the development of guidance and to ensure that this is readily available and targeted – especially at people who may unknowingly generate tax liabilities
- HMRC engage fully with technology developers to provide reassurance to the burgeoning self employed that digital applications are fit for purpose in submitting accurate tax data and returns as necessary
- HMRC consider the case for establishing an app for the self employed to help them manage their tax affairs
More generally, the OTS strongly supports the continuing efforts of HMRC to improve their guidance.
Though in the past people have been sceptical of government attempts to use new technology, the OTS believes HMRC has a critical role in ensuring software applications designed for the self employed to manage their tax affairs are fit for purpose and they should also consider establishing a digital tax app to simplify how people interact with them.
This latest OTS paper follows an earlier one on the Gig economy published in December 2016, and the update to that paper published in June 2017. It’s worth noting this paper considers the tax experience only of those who work through digital platforms, rather than of those who, for example, sell or buy goods or rent out their spare room for short term holiday lets through such a platform.
It will be interesting to see if government, and HMRC meet the challenge laid down to them by the OTS which is an independent adviser to government on simplifying the UK tax system, to make it easier for the taxpayer; it does not implement changes as these are a matter for government and for Parliament.
The Bedrock team is experienced in working with the self-employed and micro-businesses that are under HMRC scrutiny and investigation over their tax affairs. Take a look at how we can help with HMRC tax dispute resolution.
