TAXING MATTERS
EVERYTHING YOU NEED TO KNOW ABOUT HMRC’S NEW ‘PLATFORM’ RULES
Article by Gary Jacobs CEO Eazitax 020 8529 2600
www.eazitax.co.uk
Although private and public hire are longstanding trades, in recent years, more and more people have opted for flexible work such as ridesharing and food delivery. This is referred to in the media as the ‘gig economy.’
So, governments have had to address tax challenges posed by this kind of work. The UK government has introduced new legislation that requires ‘online platforms’ to directly report the income details of their sellers (drivers in this case) to HMRC.
Let’s explore this legislation’s impact on drivers and the platforms they work for.
HMRC mandates that digital platforms operating in the UK must report income details of their sellers to HMRC. This information includes earnings, the number of journeys or deliveries completed and expenses incurred by the drivers. This legislation aims to improve tax compliance in the gig economy, ensuring drivers pay the right amount of tax on their income. However, this is only for what’s called a digital platform, not necessarily private hire operators.
What is the impact on app drivers?
1. App earnings will be more evident to HMRC: before, it was easier for workers to earn money under the table. Now, because platform app companies must share earnings information with HMRC, it is harder for drivers to avoid paying the exact correct amount of tax.
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Example: Sarah, a part-time Uber driver, now receives annual tax statements from Uber directly, outlining her earnings and deductions. This makes it easier for her to file her taxes accurately.
2. Clearer tax rules for drivers: the new law makes it easier for drivers to understand how much tax they need to pay. Now, drivers can easily determine how much they have earned and spent.
Example: John, a food delivery driver for Deliveroo, used to struggle with calculating his tax liability. With Deliveroo reporting his income to HMRC, John can now easily determine his tax liability and ensure he pays the correct amount.
3. Potential financial impact: while the change aims to make people better at paying taxes, it can also have financial implications for some drivers; those who previously underreported their income may now have to pay higher tax bills.
Example: David, a self-employed courier, used to
underreport his earnings. With HMRC
receiving detailed income reports from his platform, he may face a higher tax bill than he expected, impacting his disposable income.
FEBRUARY 2024 PHTM
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