The Office of Tax Simplification (OTS), an independent advisor to the government, has released a report on the tax implications of individuals working through online platforms. The report does not deal with the individuals' status for employment law purposes. Therefore, the first stage is to identify the status of the individuals. If it is concluded that the individuals are self-employed, the report then comes up with suggestions to increase the tax compliance of the individuals, including in particular a suggestion that the platforms operate a system equivalent to PAYE for self employed platform workers (without affecting their employment status).
This suggestion would be a significant step change for online platform workers. Even if individuals working through online platforms are self employed, the government is seeking to increase tax compliance and plug the 'tax gap' by implementing a PAYE equivalent mechanism. Looking at the proposals more positively, it would provide the individual with a way in which tax can be calculated and paid throughout the tax year, rather than paying tax in lump sums. In order to withhold the correct amounts, particularly given that such individuals may have multiple jobs, the report suggests using a tax code specifically for self-employed individuals working through an online platform. The report acknowledges that this idea is in the early stages of conception and would need additional work on viability and technical details.
The report notes the increase in the number of individuals working through online platforms, although it acknowledges that this remains a relatively small portion of the UK economy. Other suggestions put forward for consideration are:
- Develop readily available and targeted HMRC guidance, particularly aimed at those who may unknowingly generate tax liabilities
- HMRC could facilitate others, such as technology developers, to provide reassurance to the self employed that digital applications are fit for purpose in submitting accurate data and returns to HMRC
- HMRC potentially partnering with the software industry to facilitate the creation of an app to help self-employed people manage their tax affairs
The outcome of recent and upcoming employment law cases and any legislative changes following the Taylor review will also feed into this area. Any re-classification of individuals as employees will have tax consequences for their 'employers' as well as the individuals themselves.
Whilst at this point these suggestions are being put to the government for further consideration and there is no concrete proposal, they do indicate that more change can be expected in this area in the future, from a tax perspective as well as in employment law. A full copy of the report can be accessed here.