Platforms, the Platform economy and Tax Simplification

OTS consider how to tackle the self-employed within the Platform Economy

The landscape of the UK workforce is changing, and with new technology, new ways of working have emerged.

Despite HMRC’s focus on tackling ‘non-compliance’ with regard to off-payroll workers, the number of self-employed people within the UK are increasing and there are no signs of this slowing down.  The Office of Tax Simplification’s (OTS) paper on ‘Platforms, the Platform economy and Tax Simplification’ was published in July, which considers platform economy working, how to determine and define a worker’s employment status, and how to make it easier for a worker to deal with their tax affairs.

With regard to the growth in self-employment, the paper reports that “the number of people registering as self-employed in the UK has increased significantly – from 3.3 million (12% of the labour force) in 2001, to 4.8 million (15.1 % of the labour force) in 2017”.

The paper recognises that part of the growth in self-employment is down to a rise in workers within the platform-based economy, but that this is unlikely to be the sole cause of the increase. Despite recent reform, particularly the introduction of the off-payroll rules within the public sector, the desire to work for oneself is still very much evident.

The way the ‘gig’ economy works is that an individual can undertake multiple, and usually short-term, jobs on a self-employed basis for various companies using platform-based technology such as mobile apps. This way of working offers flexibility for both the individual and the company requiring the work. It also offers a more unconventional way of working for those people who want a more varied working life, or for those who are unable to commit to a traditional working pattern.

Organisations such as Uber, Deliveroo, and Hermes (to name but a few), famously offer platform- based working, all of whom have suffered employment tribunal claims from individuals who felt that they should be entitled to employment rights. In most cases this decision has been upheld by the employment tribunal. The Guardian reported on the Hermes employment tribunal case and stated that;

“An employment tribunal in Leeds ruled that the couriers were entitled to receive the minimum wage and holiday pay, and to reclaim unlawful deductions from their wages, because they had incorrectly been classified as self-employed.”

Conversely, a Hermes spokesman said of the decision:

“We will carefully review the tribunal’s decision, but we are likely to appeal it given that it goes against previous decisions, our understanding of the witness evidence and what we believe the law to be.”

The law surrounding the employment status of individuals working in the gig or platform economy is certainly not clear, hence the number of employment tribunal cases being brought against companies offering this way of working. The fact however that in most cases decisions have been in support of employment rights, will certainly set a precedent for future cases.

The OTS’s paper does make a distinction between those individuals who might be employed and those who might be genuinely self-employed:

“For platform workers, an important underlying issue is whether they are employed by the platform or are self-employed and simply secure work through a platform.”

The only suggestion by the OTS in determining the employment status of an individual (for tax purposes) is considering control. We could therefore end up with a similar situation to that of the Agency Legislation, where if the worker operates under the supervision, direction or control of the end client, then the agency will be required to deduct the appropriate tax and NICs.

The OTS estimate that platform-based working is going to grow at a steady rate and that “Self-employment now accounts for about 5 million workers in the UK, up to 1.3 million of which spend at least part of their time working in the platform economy.” Additionally, research undertaken by the Chartered Institute of Personnel and Development (CIPD) has shown that over 51% of platform workers are satisfied with their pay, in comparison to other workers, of whom only 36% are satisfied.

It seems that this way of working is the future and is unlikely to slow down or lose its appeal. Whilst the OTS make some reasonable suggestions, as with IR35, such suggestions seem to be merely putting a sticking plaster over the problem, providing only a short-term fix. With regard to implementing change, the paper notes that:

“The platform economy is evolving so quickly that the time required to make changes may make new legislation redundant before it takes effect.”

Such a statement speaks volumes and highlights that HMRC simply cannot keep up.