The Office of Tax Simplification last week published a paper on gig economy workers and tax, offering several proposals, in particular that the 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.

The paper, titled ‘Platforms, the Platform economy and Tax Simplification’, suggested that gig economy platforms such as Uber and Deliveroo volunteer to pay employment taxes for workers who use their digital platforms.

Paul Morton, OTS Tax Director, said in a statement, “This does not change the employment status of the platform worker.”

This means that the gig economy workers would still have no rights to holiday pay, minimum wage, sick pay, Pension Act contributions, etc. Employment tribunals would still decide if gig economy workers are entitled to employment rights which would be based on employment law.

“The idea of ‘PAYE for platforms’, which so far as we know has not been suggested before, would be optional,” Morton said. “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.”

Kevin Barrow, Partner for Osborne Clarke, commented on the paper, “As with the new IR35 regime and the Intermediaries tax regime of 2014, it will probably force platform workers who want to be paid on a self-employed basis (with tax and NICs savings) to move further away from time based charging towards a statement of work/fixed price for defined deliverables,” Barrow said. “There will be complex issued to address relating to assessing whom is and who is not a worker for these purposes (as with IR35). Nevertheless, it may make some platforms decide (as some have already) to move towards being a contractual intermediary engaging the workers on a traditional employment or staffing company basis with rights to National Minimum Wage and holiday and sick pay etc."

 Samantha Hurley, Operations Director at APSCo, commented, “This is an interesting development as HMRC is currently consulting on off-payroll working in the private sector whether direct or though an intermediary and I imagine that the OTS report will feed into this.  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.

“HMRC’s preferred option is to roll out the current public sector off payroll rules into the private sector in which case the status of all payroll workers would need to be determined by the end client and appropriate taxes deducted,” Hurley said.  Whether a worker could then opt in to a withholding tax if found outside IR35 is an interesting idea as arguably it could help workers who struggle with the fiscal management and compliance requirements of being self-employed.”

Dave Chaplin, CEO and founder of contracting authority ContractorCalculator, also commented on the OTS paper, “This looks like more complexity being introduced into the system, rather than taken out of it. 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.”