The Low Incomes Tax Reform Group (LITRG) has called for the Taylor review to investigate the relationship between tax and non-standard work, frequently described as ‘gig economy’ work.
The popularity of non-standard work such as agency work, zero-hour contracts and self-employment has helped to coin this phrase. It can be defined as short-term, casual work and many people seek it out with the use of apps. It can provide flexibility, as workers choose when they work, fitting it in around other commitments. Roles can include DIY tasks, delivering items or driving.
Although The Taylor Review, commissioned in October 2016, is specifically going to look at employment law and practice and aims to undertake ‘An independent review of employment practises in the modern economy’, the LITRG has argued that it is impossible not to consider tax alongside employment. The two are linked.
A worker’s ‘security, pay and rights’, also ties in with how they are taxed and these topics will be part of the review. The LITRG also urged the review to consider workers’ tax, National Insurance (NIC) and tax credit positions.
Using the example of statutory payments such as sick or maternity pay, which are only provided to an employee if a ‘secondary contributor’ – someone who pays Employers’ NIC, exists, the LITRG have shown that gig economy workers can easily be exploited. They are not entitled to such payments, because secondary contributors do not exist for them, and low income individuals are particularly vulnerable.
Without exploring the rise in this type of work, which is often attractive to employers due to the ability to minimise or avoid taxes through it, the LITRG are worried that the review would not present an accurate picture of the modern economy.
Commenting on the need for a closer look at worker taxes, Anne Fairpo, Chair of LITRG, said: “The 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.
“We think that a comprehensive review of tax and related issues and non-standard work should be carried out as a matter of urgency and hope that such a recommendation is made by Matthew Taylor and his panel.
“Even where 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.”
Something that often causes confusion for workers is how they are categorised when it comes to tax. ‘employed’ and ‘self-employed’ categories are in place for tax, but an additional category of ‘worker’ existing in employment law is proving problematic. LITRG believes this leads to workers potentially missing out on certain rights.
Fairpo added: “Exploitation of workers often manifests itself in problems with their tax and National Insurance Contributions such as employers not paying over withheld amounts of Pay As You Earn (PAYE) to HMRC.
The results of the Taylor review are not expected to be published until after the General Election.
Do you work in the gig economy, or aren’t sure and want to ensure you have all the information you need? Speak to a TaxAssist Accountant today.