New Office of Tax Simplification (OTS)paper outlines simplifications for self-employed digital platform workers – including tax withholding by platform operator.
The Office of Tax Simplification (OTS) has published a new discussion paper. It considers how tax compliance could be simplified for self-employed individuals who find work through online platforms.
The OTS cites two key issues for self-employed platform workers which were identified by HMRC research:
As the expected growth in self-employment has the potential to exacerbate these issues, the OTS suggests that a clear approach to how those in the ‘gig’ economy interact with the tax system is critical. We agree.
As the purpose of its paper is to prompt debate, the OTS does not make any specific recommendations.
Instead it outlines the following potential approaches for future discussion:
The OTS suggests a model for how an optional withholding system might work. In summary, for workers who choose to participate, this might involve the platform operator:
A voluntary withholding regime for self-employed platform workers does have the potential to simplify personal tax compliance. If successful, it could also potentially be extended to other self-employed individuals.
That said, we think there would be a number of issues to think carefully about in deciding whether or not this could be a practical approach.
Withholding based on actual or estimated weekly or monthly profits could require complex legislation and be operationally challenging – for both the platform operator and HMRC.
Platform operators might be concerned at the prospect of being required to operate withholding at a worker’s discretion, and incurring the associated costs without any direct business benefit.
The OTS recognises these challenges, and suggests that a practical, rather than legislative, solution – such as improved HMRC guidance and innovative use of technology – may therefore be the better approach in the short term.
We agree, particularly as the Government may in any event decide to make changes to the position of workers in the ‘gig’ economy further to the Employment Status Consultation and the Taylor Review (see our comments on Taylor, the Government’s response and the Consultation,).
We welcome this OTS contribution to the debate on tax compliance among the self-employed platform workers in the gig economy and we await the Government’s response with interest.
If you have any queries, or would like to talk through any aspects of the taxation of ‘gig’ workers, please get in touch with your normal contact or e-mail email@example.com.