Ad hoc workers who are employed by organisations like Uber and Deliveroo could have the tax that they owe taken at source despite the fact that many are considered to be self-employed says Lee Hamilton, partner at Blick Rothenberg.
'The Office of Tax Simplification ("OTS") have published proposals which should make it easier for so called ‘platform workers’ to pay the tax that they owe to HM Revenue & Customs ("HMRC") despite the fact that they are often considered to be self employed and are required to register for self assessment', says Lee.
Lee said, 'This should make it a lot easier for people who work for organisations like Uber and Deliveroo on an ad hoc basis using some form of technology platform to secure work.'
He added, 'There has been a spate of recent employment law cases involving such companies, focusing on whether the individuals should be deemed workers for employment law purposes.
'Being a worker (as opposed to being self-employed) means that the individual has certain entitlements, including entitlement to the National Minimum Wage, and paid holiday leave. However confusingly, for tax purposes, there is currently no ‘worker’ status. So, for many platform workers, they may be workers for employment law purposes but, depending on the individual circumstances may be self-employed for tax purposes.'
Lee says, 'Currently, these workers are required to register to file self assessment income tax returns in order to report their income and pay tax. This can be an onerous process for someone who perhaps works sporadically and is not used to filing tax returns.'
He added, 'It often means that these workers are caught out by the revenue and are fined for not making their returns on time or at all.
'Now the OTS are suggesting a withholding tax for such workers (similar to PAYE for employees) to collect tax. Their aim is to make tax more straightforward for platform workers. Withholding would be operated on profit by the platform (as opposed to gross remuneration) which means that there should be a mechanism for individuals who are deemed self-employed for tax purposes to set off qualifying expenses against their gross income which in turn should mean that not only will these workers be paying what they owe, they will be able to claim legitimate expenses against the tax that they owe and this will be taken without them getting into the complicated area of self assessment.'
Lee says, 'The OTS plan to introduce better guidance for platform workers when it comes to tax as well as the introduction of government backed technology to help platform workers manage their tax affairs.'
He added, 'The proposals are a sensible attempt to make things easier for platform workers who, unsurprisingly, are confused by what they need to do with regard to managing tax.'
'It is likely that the government will support the principle of a withholding tax for platform workers since it means that tax is more likely to be collected. However, as ever with such issues, the benefits of simplification will need to be balanced with the cost and practical difficulty of implementation.'
Lee added, 'Whilst self-employed individuals outside the platform industry should not be affected by the proposals, if they are taken up and implemented by the government, we could see a wider roll out amongst the self-employed population.'
'No doubt there will be much resistance to such a move since self-employed people currently enjoy the cash-flow advantage of paying their tax at year-end. However, with technological advancements and a drive to maintain tax revenues, it is not beyond the realms of possibility that we will see this on the agenda over the next few years.'
For more information, please contact Lee Hamilton.