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PAYE Equivalent Proposed for Gig Economy Workers

PAYE Equivalent Proposed for Gig Economy Workers

Workers within what has become known as the ‘gig economy’ could benefit from having the option of resolving their tax affairs via a system similar to PAYE, according to the Office of Tax Simplification (OTS). 

The OTS doesn’t go as far as to actively recommend a PAYE equivalent for gig economy workers but has said that the government should consider the idea as a means of potentially improving the UK’s current tax system.

PAYE or Pay As You Earn functions in a way that sees income tax deducted from earnings paid to employees but gig economy workers are expected to engage with HMRC directly and to deal with their income taxes as self-employed professionals.

The issue of whether or not workers for companies such as Uber and Deliveroo are employed by those businesses or are self-employed has been the subject of widespread conjecture and legal dispute in recent years.

The companies whose businesses rely on gig economy workers insist that their operatives are self-employed and aren’t employed by them directly, which has had the consequence of obliging many thousands of people to acquaint themselves with HMRC’s self-assessment tax return processes.

The OFS hasn’t commented on whether gig economy workers should or should not be seen as employees, but is of the opinion that the current situation could and should be improved as far as the tax process implications are concerned.

“The idea of ‘PAYE for platforms’, which so far as we know has not been suggested before, would be optional,” explained Paul Morton, OTS tax director.

“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.”

Mr Morton added that he thought a ‘PAYE for platforms’ approach would make tax collection more efficient for HMRC and potentially much more straightforward for individual taxpayers.

A government report published in February 2018 suggested that roughly 2.8 million people living in the UK had worked in the gig economy at some point during the previous 12 months.

David Tattersall
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