A welcome relief to many tax specialists on reading the Taylor Review
was the extent to which it sought to address the issue of tax as well as working rights.
Dealing with undeclared activity
A section of the review is dedicated to dealing with the hidden economy which suggests HMRC and the Treasury contributed to the consultation and their views were taken on board. The hidden economy is usually taken to mean any undeclared activity and ranges from work paid cash in hand through to tax evasion and organised crime. HMRC has embarked on several initiatives to tackle the problem with varying degrees of success. However, the amount of tax and NIC captured by these initiatives is a drop in the ocean when compared to the overall cost of the hidden economy, currently estimated to be £6.2bn.
The review recommends that the government consider accrediting a range of platforms designed to support the move towards more cashless transactions, the aim being to increase the transparency of payments whilst assisting individuals with the ability to pay the correct amount of tax. The review recognised that this was a problem for self-employed individuals operating in the gig economy, many of whom were unclear on what to declare in their tax returns, or for whom this was a second job for which they were not making any declaration at all.
The Taylor review and Making Tax Digital
The idea is a sensible one as it fits with HMRC’s Making Tax Digital plans while ensuring there is a low cost to compliance in this area. This will require the active participation of the self-employed individual involved and a willingness to comply with the tax system. The review could have gone further though and recommended a system of withholding tax for dependent contractors much like public bodies are now required to do in respect of payments made to personal service companies. It would be no surprise that HMRC would welcome such a system and this may well form part of the government’s response to the review which is expected by January 2018.