Uber ruling will intensify tax crackdown on ‘gig economy’

The ruling against Uber last week, which challenges the classification of their workers as self-employed in the UK, will accelerate investigations by HMRC into businesses in the ‘gig economy’, says Moore Stephens, the Top Ten accountancy firm.

HMRC is currently reviewing the tax treatment of self-employed contractors that work for ‘gig economy’ businesses.

HMRC has recently launched a specialist task force, the Employment Status and Intermediaries Team, which will be responsible for ensuring that these businesses are paying the correct amount of tax and implementing penalties if applicable.

This comes at a time of increased government attention on the ‘gig economy’. Some government ministers have been calling for an investigation into businesses using large numbers of self-employed workers amid concerns over the employment status of these people.

There are certain tests which HMRC uses to ascertain whether the employment status of people in the ‘gig economy’ is correct.

Mark Collins, Director of Employer Consulting at Moore Stephens, says: “The ‘gig economy’ is growing rapidly and given the attention it has received recently, it is not surprising that HMRC has started to focus its efforts on businesses operating in this sector.

“Classifying people as workers rather than self-employed will impose additional costs onto businesses even if HMRC is not successful in arguing they should be employees for tax purposes. It is going to be difficult for equivalent companies to defend that the individuals are not workers with a significant additional cost applying.”

Businesses such as Uber, which employs 40,000 people in the UK, Hermes (10,500), and Deliveroo (8,000) classify their workers as self-employed and therefore do not have to give worker rights and costs. Citizens Advice has claimed that HMRC may be losing £314m each year in tax revenue from as many as 460,000 people being classified this way.

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