Gig Economy Review Should Consider Tax

LITRG wants Taylor Review to look beyond employment issues

The Low Incomes Tax Reform Group (LITRG) has urged the Taylor Review to examine the relationship between taxation and the growth in non-standard work, such as people working in the ‘gig economy’. This relationship is something we are particularly concerned with, in our role as contractor accountants.

Commissioned in October 2016, the Taylor Review is focusing on employment law and practice and not taxation. It will look at security, pay and rights, progression and training, the balance of rights and responsibilities, representation, opportunities for under-represented groups and new business models. This has led the LITRG to raise concerns that the Government may struggle to comprehend the changing nature of work or even make substantial changes to employment practices without first analysing the intertwined relationship between employment law and tax.

Anne Fairpo, Chair of the LITRG said:

“The Matthew Taylor Review should not be seen as a comprehensive review of employment practices, because its terms of reference do not include tax. In our view, you cannot understand one without the other.

The exploitation of workers often manifests itself in problems with their tax and NIC such as employers not paying over withheld amounts of PAYE to HMRC. Even when there is no legal wrongdoing as such, minimising tax or trying to avoid HMRC administration is often a factor in terms of employers offering non-standard forms of work, for example, zero hours contracts or temporary positions over full-time, permanent, direct employment.

Not only can this type of work make workers’ lives insecure and unfulfilling but there is a huge knock-on effect on public finances, with much of the welfare system funded from general taxation – surely a longer-term consideration when thinking about a worker’s security.”

LITRG is also concerned about a lack of harmonisation, in that there are just employed and self-employed categories in taxation but in employment law, there are three, with the addition of a ‘worker’ category. The complexity and inconsistency of these status tests causes confusion and leads to workers missing out on their rights.

As part of the solution, the LITRG has suggested that individuals, as a matter of default, should be treated as ‘workers’ unless the engager can prove otherwise.