We have all heard the term 'gig economy' but what does it actually mean? The Office of Tax Simplification (OTS), in its focus paper (published on 2 December 2016), states that "the gig economy is an environment in which temporary positions are common and organisations contract with independent workers for short-term or on-demand engagements". A dictionary definition would be: "A way of working that is based on people having temporary jobs or doing separate pieces of work, each paid separately, rather than working for an employer." The OTS has found that this arrangement is typically facilitated by a technological interface or internet platform.

The aim of the OTS' focus paper is to promote discussion of some of the tax issues and implications arising from the gig economy and the sharing economy. It is not a consultation document, asks no formal questions; and the OTS hopes it will stimulate other parties to look at the issues that it has identified and to spot any gaps in the view OTS has taken.

The OTS explains in its paper that its role is to look at aspects of the tax system and develop recommendations for simplification. In the context of the gig economy, a key issue is how such workers interact with the tax system and how that interaction can be made as simple as possible.

The OTS has identified the following matters for consideration:

  • Individuals in the 'gig economy' typically have multiple income streams from different ‘gigs'.
  • Thought should be given to facilitating – indeed encouraging – tax payments on gig incomes.
  • It will be necessary to design a system to help the taxpayer pay the correct tax.
  • It may be helpful to include the involvement of the engager.
  • It will be necessary to consider whether ‘employment taxes’ are due.

The OTS has also identified that pensions will be a significant issue. These are cross-government issues that have an impact on employment status, tax status, pensions and welfare.