OTS reviews tax reporting for self employed

The Office of Tax Simplification (OTS) has launched a project to review tax reporting and payment arrangements for self-employed people and buy-to-let landlords

This work will explore the merits and drawbacks of existing approaches to tax reporting and payment for self-employed people, such as the construction industry scheme (CIS), and of new developments or planned approaches to this, including options for information reporting or payment of tax to take place closer to real time.

The plan is to release an initial report this autumn following consultation with key stakeholders, the Treasury and HMRC.

Due to the complexity and diversity of self-employed work, the OTS said that the proposals would look at a mix of options to address multiple employment scenarios, and it was not ruling out proposing different recommendations depending on the type of work involved, whether it is platform-based or sub-contracted, for example.

The review will take into account the different segments or populations of self-employed people ‘where their circumstances or business models may point to different approaches or options, and the likely level of interest or appetite for these,’ the OTS said.

In terms of the buy-to-let market, it will review the tax compliance issues for landlords earning rent from letting residential property, whether on a short or a long-term basis.

It will also consider the scope, including opportunities and risks, for self-employed people’s tax affairs to be managed in real time or closer to real time, taking expenses into account, and the issues involved where the self-employed person has other income, whether from employment or other sources, and links with personal or business tax accounts.

The government is moving towards a system of individual digital tax accounts for taxpayers and the ending of self assessment, which would give taxpayers an overview of all their income in a single place. However, this rollout has been delayed and is unlikely to be fully functional before the 2021/22 tax year at the earliest.

Efforts to reform the complex gig economy and worker status are urgently required as more workers take up platform work.

Zena Hanks, partner at the Bristol office of Saffrey Champness LLP, said: ‘Getting a real-time tax system to accurately record and report taxable profits, whether from the self-employed or from landlords to facilitate the payment of accurate income tax as the data is reported is ideal.

‘However, we already know that the PAYE system doesn’t cope very well where individuals have multiple income sources of employment or pension income. This is a real issue for unrepresented individuals who must navigate an increasingly complex tax system and struggle to speak to a HMRC representative to get this put right.

‘If we are to move towards real time collection of information and in turn tax payments, an absolute must is to ensure that where tax is collected in real time, there must be functionality in real time to have corrections and overpayments of tax addressed by HMRC.’

The closing date for comment is 30 August 2019.

This project follows a number of earlier reports into tax and the gig economy including a technology discussion paper, published in January 2019; and earlier reviews on the impact of the platform economy on self-employed people, and an earlier paper on the gig economy, last updated in July 2017.

OTS Simplification of tax reporting and payment arrangements for self-employed people and landlords of private residential property issued 11 July 2019

Sara White | 30-07-2019

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