Gig economy firms should handle tax and PAYE for their self-employed workers, says OTS

Businesses operating in Britain’s so-called gig economy should be required to take responsibility for the tax affairs of their self-employed workers through a PAYE-style system, the Office of Tax Simplification (OTS) has said.

The calls, which feature in a 20-page report published by the OTS this week, would help to ‘ease the compliance burden’ faced by gig economy workers while simultaneously increasing tax revenue, the OTS says.

Under existing rules, such workers typically carry out various jobs and are paid on a ‘piecemeal’ basis. They are then expected to complete their own self-assessment tax returns.

However, the OTS’ proposals would require the platforms that offer these people work, such as Uber and Deliveroo, to implement a PAYE-style system.

These platforms would then be required to use this system in order to deduct tax from their workers’ earnings and pay this to HM Revenue & Customs (HMRC) on their behalf, the report reveals.

Announcing the proposals, Paul Morton, Tax Director at the OTS, said that the change would “remove the administrative burden” from gig economy workers.

He added that the proposed new rules would also “mean that they should not get an unexpected tax demand at the end of the year.”

According to the OTS’ report, requiring gig economy platforms to pay tax through “an established mechanism such as PAYE” would also go a long way toward reducing the risk of non-compliance.

“For example, tax might be paid to HMRC on a monthly rather than annual basis and tax is collected at minimum cost to the Government,” it said.

The proposals come at a time when the number of people opting to go self-employed in the UK is rapidly growing, having risen to almost five million last year.

It is estimated that some 1.3 million of these workers currently rely solely on gig economy work.