Not All’s Fare In Taxis And Employment Law – Part 3
The Uber Case Part 3 – The Taxation Grey Area and Who Will Foot The Bill?
The rise of quantum employment in the platform economy is being driven by technological innovation of services such as Uber and thus driven up the necessity of contingent labor and payment intermediaries such as umbrella companies. The way we work is changing; people want to work flexibly at times they choose, and in places they choose.
It is clear to see that the evolution of working practices is moving at a much greater velocity than legislation, highlighted by the Uber tribunal case outcome. The classification of Uber’s drivers as workers with regards to their employment rights will no doubt raise the same questions for many more working in the platform economy and has been brought into sharp focus this week with the value of Deliveroo falling dramatically on the opening morning of its IPO debut.
Advisors Goldman Sachs and JP Morgan planned the listing value to be at almost £8 billion, but almost £2 billion was wiped off by Wednesday. Describing the debut as the ‘worst IPO in London history’, a person close to the deal told Business Cloud: “I really hope that this doesn’t shut down the IPO market [in the city].” LINK
The dichotomy for the Uber Workers, which may have been overlooked as they pursued their claim for employment rights, is that it may be inferred that as “employees” they should be taxed as such. One of the main advantages of working as a self-employed worker is that Employment Costs (Employer’s National Insurance (13.8%, Employer’s Pension 3%, and the Apprentice Levy 0.5%) are not due to be paid in a self-employed contract chain.
These workers now sit in a taxation grey area, where their legal status is worker, which does not fit clearly in tax status, and so how should they be taxed, and where do they sit? Using figures from the Office of National Statistics, The employment landscape could seemingly be interpreted as looking like:
The lay of the land with regards to what the employment landscape now looks like can be looked at and debated the world over and we will look at this in another article in relation to the Quantum workforce.
What is clear (or not!?) is that the Worker category straddles the employed and self-employed statuses indicating that some workers should be taxed as employees whereas some should pay tax as self-employed; however there is no real guidance on this and it is evolving in legal precedent which feels like shutting the stable door after the horse has bolted.
An improvement is most certainly required, maybe even something drastic, for people who sit in this worker category akin to the deduction taken by intermediaries for CIS workers. This seemingly magic WAND (Workers Advanced Nominal Deductions) could help ensure that the tax system keeps up to date with the new and rapidly evolving Quantum workforce.
This would ensure that as the legislation evolves for the rights of workers; then the basis of taxation for these workers can evolve alongside it. However, it’s not all clear cut. A radical measure such as WAND (trademark™ pending) would require huge investment and a system overhaul from the government. In addition, HMRC, software providers and intermediaries would carry the burden of implementing these changes. Inevitably these changes would take months and years, by which time who knows where the platform industry (and other so-called disrupter models) will have taken us!
HMRC’s recently announced 10 Year Strategy confirms that HMRC’s vision necessarily needs to cross Parliamentary/Democratic timeframes (which are seemingly like Starfleets five year missions). In other words, taxation strategy may need some kind of long term cross-party initiative.
Furthermore, if Employment Costs are now deemed to be due in the same way as Employment Rights – who will foot the bill: The Engager (Uber); the Worker (the taxi driver) or the End Client (You and I)?
Undoubtedly, Uber costs will rise, so the End Client will foot at least some of the bill; but whether that is split amongst all parties is yet to be seen. Deliveroo’s experience this week has highlighted that these can be expensive questions to answer!