The Office of Tax Simplification (OTS) is suggesting the introduction of a PAYE option for online platform workers, which would see operators such as Deliveroo or Uber deducting tax from their earnings and thereby taking responsibility for fulfilling the tax obligations of their workers
Paul Morton, OTS tax director, said: ‘The idea of “PAYE for platforms”, which so far as we know has not been suggested before, would be optional.
‘This does not change the employment status of the platform worker. However, for those who chose it, it would remove the administrative burden from these individuals, who can be some of the most vulnerable in the labour market and mean that they should not get an unexpected tax demand at the end of the year. It would also make tax collection more efficient.’
The OTS sketches an outline for a PAYE for platform workers which would see the platform compute taxable profit in real time. The platform would then withhold tax, either on an even basis or ‘back-end’ loaded for those with more fluctuating income, which it would then pay on account to HMRC.
Under this scheme, the platform signs up with HMRC as ‘agent’ for the platform worker so that they can apply the equivalent of a tax code – or at least reflect the personal allowance where relevant. the platform can ‘correct’ the withholding at the end of the year so the platform worker has nothing further to do. The OTS says this mechanism could initially apply only to large platforms but, over time, could be extended to smaller engagers.
Other recommendations in the paper are that HMRC continue to focus on the development of guidance and to ensure that this is readily available and targeted - especially at people who may unknowingly generate tax liabilities.
The OTS wants HMRC to engage fully with technology developers to provide reassurance to the growing numbers of self employed that digital applications are fit for purpose in submitting accurate tax data and returns as necessary, and says HMRC should consider the case for establishing an app for the self employed to help them manage their tax affairs.
The OTS paper set out to address the question of how self employed workers can be provided with as simple an experience as employees in relation to their tax affairs. Its focus is on those who obtain work via digital platforms, rather than anyone who uses an online service to rent out rooms or for holiday lets.
The OTS noted: ‘It is not the purpose of this paper to comment on the borderline between employment and self employment in terms of employment rights, or the employment law status of “workers” who are treated as self employed individuals for tax purposes.’
Platforms, the Platform economy and Tax Simplification is here.
Report by Pat Sweet
