The Office of Tax Simplification have published a paper ‘Focus on the ‘Gig’ economy: What does it mean in terms of tax.’
Terminology in use
- ‘Gig’ is where organisations or independent workers contract for short-term engagements.
- ‘Sharing’ in this context can mean generating money by sharing or renting out assets.
- ‘Platform’ is IT systems to facilitate or connect opportunities for gig or sharing.
Tax issues
The OTS paper identifies tax issues and their impact for the parties involved in the gig economy:
The individual worker
- Employed or self-employed for tax purposes?
- How do they interact with the tax system?
- Is the system simple for them?
- Can they afford to engage an accountant for help?
The platform operator
- Will not expect any PAYE or NIC consequences to arise.
- Should they assist their users understand or meet tax obligations?
- Should they have an obligation to report to HMRC who is using its services?
- Should employment intermediaries’ legislation include platform operators?
The hirer (individual or company offering the gig)
- Will expect to pay a gross fee and not operate PAYE or NIC.
- Should there be any reporting requirements?
HMRC
- How can tax on the gig workers’ income be collected?
- How will HMRC identify and communicate with the individual gig workers?
- How can HMRC cope with the practicality of dealing with numerous gig workers rather than with a single employer?
- Could HMRC require all platform operators to check that its users have a relationship with HMRC?
- The OTS recommends that a well understood framework is needed for gig workers, along with an easy means for them to fulfil their tax obligations.
The Exchequer
- Receipts, particularly of employers’ National Insurance, are likely to fall.
- The risk of non-compliance may also affect receipts.
The aim of the focus paper is to promote discussions of the tax issues and their implications. No formal questions are posed by the OTS, but they would welcome any contributions and observations.
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