A proposal that UK gig workers should pay income tax could create further confusion around employment status, experts have warned.
The concern follows the release of a paper by the Office of Tax Simplification looking at how the tax of gig economy workers who operate through online platforms could be simplified.
According to the Recruiter, it calls on the Government to consider enabling online platforms used by organisations, such as taxi or delivery firms, to operate a system equivalent to the pay-as-you-earn withholding tax. Gig workers are currently considered self-employed for tax purposes.
Commenting on the paper, Samantha Hurley, operations director at recruitment trade body APSCo, called the recommendation an “interesting” development in light of the UK Government’s ongoing consultation to extend the IR35 off-payroll rules from the public into the private sector.
"While a withholding tax was suggested as an option in a previous consultation, HMRC [Her Majesty’s Revenue & Customs] has ruled this out, telling us that they feel that a system of withholding tax from everyone and then expecting those who were genuinely self-employed to claim back wrongly-paid tax would be inherently unfair," she said.
But Hurley acknowledged that this latest recommendation was “slightly different” in that it suggests withholding tax from workers who are determined as self-employed. “Consequently, it is likely that the end client would need to undertake a status determination," she said.
Dave Chaplin, chief executive and founder of online contractor portal ContractorCalculator, warned the proposal could introduce yet more complexity into the current tax system though.
"The reality is that the tax system has not kept up to date with the modern way of working,” he said. “Government is concerned about the drain on the hidden payroll tax of employers' National Insurance, and this is just another way to try and plug that gap."
HMRC had already tried to reclassify the status of 'self-employed' people by introducing a 'guidance tool' that has no basis in law, called CEST, Chaplin added. But this situation “unwittingly pushes firms into thinking the self-employed workers they hire might really be employees. The government will not be happy until everyone is on the payroll, whether they are employees or not," he said.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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A proposal that UK gig workers should pay income tax could create further confusion around employment status, experts have warned.
The concern follows the release of a paper by the Office of Tax Simplification looking at how the tax of gig economy workers who operate through online platforms could be simplified.
According to the Recruiter, it calls on the Government to consider enabling online platforms used by organisations, such as taxi or delivery firms, to operate a system equivalent to the pay-as-you-earn withholding tax. Gig workers are currently considered self-employed for tax purposes.
Commenting on the paper, Samantha Hurley, operations director at recruitment trade body APSCo, called the recommendation an “interesting” development in light of the UK Government’s ongoing consultation to extend the IR35 off-payroll rules from the public into the private sector.
"While a withholding tax was suggested as an option in a previous consultation, HMRC [Her Majesty’s Revenue & Customs] has ruled this out, telling us that they feel that a system of withholding tax from everyone and then expecting those who were genuinely self-employed to claim back wrongly-paid tax would be inherently unfair," she said.
But Hurley acknowledged that this latest recommendation was “slightly different” in that it suggests withholding tax from workers who are determined as self-employed. “Consequently, it is likely that the end client would need to undertake a status determination," she said.
Dave Chaplin, chief executive and founder of online contractor portal ContractorCalculator, warned the proposal could introduce yet more complexity into the current tax system though.
"The reality is that the tax system has not kept up to date with the modern way of working,” he said. “Government is concerned about the drain on the hidden payroll tax of employers' National Insurance, and this is just another way to try and plug that gap."
HMRC had already tried to reclassify the status of 'self-employed' people by introducing a 'guidance tool' that has no basis in law, called CEST, Chaplin added. But this situation “unwittingly pushes firms into thinking the self-employed workers they hire might really be employees. The government will not be happy until everyone is on the payroll, whether they are employees or not," he said.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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