Late last week, the OTS released a paper looking at gig economy workers who operate through online platforms on how they pay tax and how this could be simplified.
 
The paper contains a recommendation calling on government to consider the case for enabling online platforms, such as taxi or delivery firms, to operate a system equivalent to PAYE (pay as you earn) – a withholding tax on income payment to employees, for self-employed platform workers (without affecting their employment status). Gig workers are currently considered self-employed for tax purposes.

Commenting on the paper, Samantha Hurley, operations director at recruitment trade body APSCo, called the recommendation an “interesting” development in light of government’s ongoing consultation to extend off-payroll rules into the private sector. 

“While a withholding tax was suggested as an option in a previous consultation, HMRC has ruled this out, telling us that they feel that a system of withholding tax from everyone and then expecting those who were genuinely self-employed to claim back wrongly paid tax would be inherently unfair. This new recommendation is, of course, slightly different in that it suggests withholding tax from workers who are, in fact, determined as self-employed. Consequently, it is likely that the end client would need to undertake a status determination,” Hurley said.

Also commenting on the recommendation, Dave Chaplin, CEO and founder of online contractor portal ContractorCalculator, said the proposal looks like it would introduce yet more complexity into the current tax system.

“The reality is that the tax system has not kept up to date with the modern way of working. Government is concerned about the drain on the hidden payroll tax of employers National Insurance, and this is just another way to try and plug that gap.

“HMRC has already tried to reclassify self-employed by introducing a “guidance tool” that has no basis in law, called CEST, which unwittingly pushes firms into thinking the self-employed workers they hire might really be employees.

“The government will not be happy until everyone is on the payroll, whether they are employees or not.”

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