OTS suggests PAYE equivalent for online platform workers
01 August 2018
The Office of Tax Simplification (OTS) has suggested an optional system equivalent to Pay As You Earn, ‘PAYE for platforms’ to simplify how gig economy workers who operate through online platforms, pay tax.
‘Platforms, the Platform economy and Tax Simplification’ is the third paper on the platform economy and tax in which it suggests how to simplify and improve the tax experience of the increasing number of individuals who work on a self-employed basis through online platforms.
OTS focus papers aim to highlight tax simplification issues, make suggestions (some radical), and stimulate debate on how improvements can best be implemented.
The key question in this latest paper is how self-employed workers can be provided with as simple an experience as employees in relation to their tax affairs. This paper considers the tax experience only of those who work through digital platforms, rather than of those who, for example, sell or buy goods or rent out their spare room for short-term holiday lets through such a platform.
The paper concludes that:
The government should consider the case for enabling online platforms such as a taxi or delivery firms to operate a system equivalent to PAYE for self-employed platform workers (without affecting their employment status)
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
HMRC engage fully with technology developers to provide reassurance to the burgeoning self-employed that digital applications are fit for purpose in submitting accurate tax data and returns as necessary
HMRC consider the case for establishing an app for the self-employed to help them manage their tax affairs.
Paul Morton, OTS tax director, said:
“The development of the gig economy and new ways of working through online platforms has profound consequences for the employment landscape. At the OTS, we are concerned with the tax implications and how the experience, especially of individual taxpayers, can be simplified. Our paper offers a number of suggested improvements, in particular, that government should consider whether online platforms could operate a system equivalent to Pay As You Earn, deducting tax from earnings and thereby taking responsibility for fulfilling the tax obligations of their workers.
This does not change the employment status of the platform worker. The idea of ‘PAYE for platforms’, which so far as we know has not been suggested before, would be optional. 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 publication of ‘Platforms, the Platform economy and Tax Simplification’ follows the OTS’s focus paper on the Gig economy published on 2 December 2016, and an update to that paper published on 22 June 2017.