Relationship between ‘gig economy’ and tax must be examined

The Low Incomes Tax Reform Group (LITRG) has urged the Taylor review to examine the relationship between tax and non-standard work.

Thegig economy’ has sprung up with the popularity of non-standard work such as agency work, zero-hour contracts and self-employment.

The Taylor review, commissioned in October 2016, aims to undertake ‘An independent review of employment practises in the modern economy’.

Tax is not expressly within the scope of the Taylor review, with the review’s focal point being employment law and practice. However, LITRG contends that tax is inextricable from employment law and a worker’s ‘security, pay and rights’, which is within the review’s purview. Specifically, LITRG urged the review to consider workers’ tax, National Insurance (NIC) and tax credit positions.

LITRG expressed concern that the review would not present an accurate picture of the modern economy without looking at the rise in non-standard work, which is becoming increasingly attractive to employers as they can minimise or avoid taxes through it.

The group adds that such non-standard types of work often result in the exploitation of low income individuals, who then struggle with work insecurity and are not afforded the same rights and benefits as direct employees.

As an example, LITRG refers to statutory payments such as sick pay or maternity pay, which are only provided if there is a ‘secondary contributor’, i.e. someone who pays Employers’ National Insurance. In the instance of the gig economy, a secondary contributor does not exist and therefore the worker is not entitled to those payments.

Anne Fairpo, chair of LITRG, commented on the need for closer inspection of worker taxes: “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.

“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.

“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.”

LITRG also raised the issue of inconsistency between categorising workers, with ‘employed’ and ‘self-employed’ categories existing for tax but an additional category of ‘worker’ existing in employment law.

LITRG explains that this often causes confusion for workers and leads to them miss out on certain rights.

The results of the Taylor review are not expected to be published until after the election.

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