Independent report

OTS suggests PAYE equivalent for online platform workers

Today, the OTS publishes a paper looking at gig economy workers who operate through online platforms, how they pay tax and how this could be simplified.

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The Office of Tax Simplifcation 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. Our paper 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 does not change the employment status of the platform worker. The idea of ‘PAYE for platforms’, which so far as we know 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.

OTS focus papers aim to highlight tax simplification issues, make suggestions, some radical, and stimulate debate on how improvements can best be implemented.

The key question is how self employed workers can be provided with as simple an experience as employees in relation to their tax affairs and this paper offers a possible solution. It is not the purpose of this paper to comment on the borderline between employment and self employment in terms of employment rights, or the employment law status of ‘workers’ who are treated as self employed individuals for tax purposes.

The 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

Paul Morton continued:

More generally, the OTS strongly supports the continuing efforts of HMRC to improve their guidance.

On new technology, we believe HMRC has a critcal role in ensuring software applications designed for the self employed to manage their tax affairs are fit for purpose and they also consider establishing a digital tax app to simplify how people interact with them.

This paper follows the OTS’s focus paper on the Gig economy published on 2 December 2016, and an update to that paper published on 22 June 2017.

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.

Notes for editors

The OTS is the independent adviser to government on simplifying the UK tax system, to make it easier for the taxpayer; it does not implement changes - these are a matter for government and for Parliament.

The OTS works to improve the experience of all who interact with the tax system. It aims to reduce the administrative burden - which is what people encounter in practice - as well as looking to simplify the rules, as simplification of the technical and administrative aspects of tax are each important, both to taxpayers and to HMRC.

Press enquiries only please contact Suzanne Hodson, OTS Press Officer

Phone: 03000 585028

Published 20 July 2018