Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
By Ali Qassim
A U.K. proposal requiring the platform economy to pay employment tax for their workers would likely raise costs and workloads for the companies, which include Uber Technologies Inc., practitioners warn.
Many self-employed individuals are also likely to resist the proposals since they “currently enjoy the cash-flow advantage of paying their tax at year-end,” Lee Hamilton, a partner at London-based Blick Rothenberg, said in a July 30 statement.
The warnings follows a July 20 recommendation from U.K. Treasury’s adviser, the Office of Tax Simplification. The plan would bring about a shift—in which platforms would use the established Pay as Your Earn System to withhold tax and national insurance contributions from their self-employed workers’ wages. It fits into a broader focus from the government on the tax treatment of self-employed individuals in the burgeoning gig economy.
But given the government’s drive to maintain tax revenues, “it is likely that the government will support the principle of a withholding tax for platform workers since it means that tax is more likely to be collected,” Hamilton said.
Self-employed individuals have created nearly half of the U.K.’s employment growth since 2008, according to the Resolution Foundation think tank. The U.K. may lose as much as 6 billion pounds ($7.9 billion) a year in employment taxes by 2021, if the trend continues, according to the foundation.
Uber didn’t return a request for comment.
British employers “want to see a level playing field between agency work and the gig economy and it’s good that this is an area the OTS is looking at it. In principle anything that makes it easier for individuals to pay the right amount of tax is to be welcomed,” Sophie Wingfield, the head of policy at the Recruitment & Employment Confederation, told Bloomberg Tax July 30.
Under current law, workers file a self-assessment income tax return and pay the bill in a lump sum at the end of each financial year.
“It often means that these workers are caught out by the revenue and are fined for not making their returns on time or at all,” Hamilton said. The proposals could make it easier for platform workers, he said.
Still, “there are a number of areas which still need ironing out,” such as how the PAYE proposals “would work for individuals working across multiple platforms,” Wingfield said.
IPSE, an association for freelancers and the self-employed, also questioned the potential pitfalls.
“There is “a real risk that this proposal would increase administration costs for online platforms which operate in competitive marketplaces”, IPSE’s Deputy Policy Director and External Affairs Andy Chamberlain said in a July 30 email statement.
Mike Cherry, the national chairman of the Federation of Small Businesses, told Bloomberg Tax in a July 30 email that “it’s vital that any reforms in the gig economy space do not negatively impact the genuinely self-employed entrepreneurs that we represent.”
Any new regime, he said, should make it easier for people to set themselves up in business “rather than acting as a further disincentive.”
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)