In its third paper on the platform economy and tax, it suggests that online platforms – such as taxi, courier and delivery firms – should be able to operate a system, similar to PAYE, for self-employed workers but without affecting their employment status.
“The idea of ‘PAYE for platforms’, which so far as we know has not been suggested before, would be optional,” explained OTS tax director Paul Morton.
“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.”
He added that the exchequer would also benefit because tax collection would be more efficient.
The development of the gig economy and new ways of working through online platforms will undoubtedly have “profound consequences” for employment in the future, the OTS believes.
It has been growing exponentially over the last couple of years. The most recent government statistics, released in February, estimated that around 4.4% of the working population (approximately 2.8m) in the UK had worked in the gig economy in the previous 12 months.
Of those surveyed, 38% said they had first become involved in it during the previous six months, 24% had worked there for between six months and two years and only 14% had been involved for more than two years. 56% of these workers were aged between 18-34.
The research also found that 42% worked for courier services, 21% in food delivery and 28% in transport. Interestingly, 18% of the total had worked for Uber.
The OTS paper, Platforms, the Platform Economy and Tax Simplification, proposes that the platforms should take over responsibility from their workers of meeting their tax obligations by deducting tax from their earnings.
Other suggestions are targeted at HMRC. The OTS wants the department to continue to develop guidance for people who may unknowingly generate tax liabilities and to make sure that this is readily available and targeted.
It would also like HMRC to engage with technology developers to reassure self-employed people that its digital applications are up to scratch when they submit their tax data and returns.
The OTS also urges HMRC to consider the case for developing an app for the self-employed, designed to help them manage their tax affairs.
The paper makes it clear that these proposals only apply to workers engaging through digital platforms and not those who buy or sell goods or rent out rooms for holiday lets via platforms.