A lot of UK firms are part of the gig economy including Pimlico Plumbers, Uber, Deliveroo, Addison Lee, and Ocado. A proposed legislation could force these firms to deduct taxes of self-employed workers similar to PAYE.
The Office for Tax Simplification (OTS) has asked the government to deduct taxes from gig workers’ earnings in order to meet tax obligations.
According to the OTS, the deduction of taxes will not change the tax status of the self-employed workers. They also won’t have to fill out a self-assessment tax return. This would make the tax collection process more convenient and efficient.
Director of OTS, Paul Morton, had stated that the development of the gig economy has deep consequences. New ways of working through online platforms has altered the employment landscape.
PAYE for platforms would be optional for gig firms. But those who select it will save in administration costs. In addition, they wouldn’t have to worry about getting an unexpected demand for tax at the year end.
The OTS has also suggested that HMRC should introduce an app for the self-employed. The app should help the employees manage their tax-related affairs. It should provide guidance to workers regarding their tax liabilities.
Criticism of the Proposed Laws
Tax consulting company RSM has raised criticism of the proposed tax laws. According to the employer solutions partner at RSM, David William-Richardson, a consistent approach is required instead of different employment models.
He stated that it’s difficult to distinguish between self-employed individuals and those working for self-employed platforms. A uniform policy is required for all gig workers instead of those that work.
We have recently seen the confusion and chaos caused due to the IR35 taxation rules. When tax laws become fragmented, it leads to problems due to an uneven playing field.
The operations director at APSCo recruitment agency, Samantha Hurley, has also criticized the OTS’s recommendations. She has stated that it would affect the HMRC consultation regarding IR35 in the private sector. If implemented it could affect the end-client resulting in an increased burden. Implementing the changes will have unintended consequences due to which it should be withdrawn.