Back in May of this year, the Office of Tax Simplification (OTS) published Simplifying everyday tax for smaller business: a further business lifecycle review' in which it was stated that some of the self-employed community would welcome a PAYE-type experience and an optional process to have tax deducted from their income. Following on from this, the OTS is now to explore the idea of Real Time Information (RTI) further and have set out the extent of their work to be carried out this summer in a scoping paper.

The UK has seen a rise in the self-employed population and none more so than those working within the freelance or gig economy. It is this category of workers who have expressed an interest in an option to report information and pay tax to HMRC either periodically or upon completion of jobs, rather than just through self-assessment. Of course, their wishes will be partly granted when Making Tax Digital is eventually mandated for income tax.

Background of OTS exploration into RTI

Two previous OTS reports provide the backdrop to the next stage of work in the area of RTI. Firstly, in July 2018 a report was published on the impacts of the platform economy on the management of tax affairs. Self-employed platform workers told the OTS they would welcome a system which felt more like PAYE and the report also considered the possibility of an app for the self-employed to assist them in managing their tax affairs. Then, in January 2019, a Technology discussion paper said it would consider in more detail the concept of introducing withholding tax.

Scope of RTI exploration work

This next stage of work will examine the pros and cons of existing regimes for reporting and paying tax for the self-employed (to include landlords owning residential property), e.g. Construction Industry Scheme (CIS), and of potential alternatives including real-time reporting of information and payment of tax. The objective here is to consider if these processes could be simplified and made more straightforward to use so that people can fulfil their tax obligations more efficiently.

Whilst this initial stage will consider a wide range of factors and possibilities, including RTI, it will not be particularly detailed as the most promising ideas to come out of the melting pot will be subjected to more detailed work.

Because self-employed people work in a number of different ways, according to their industry sectors, it is likely that a one size fits all approach to make things simple may not be practical. Consideration will, therefore, be given to the merits of having different approaches for different groups or creating one system with sub-options and trade-offs.

Have your say on RTI for the self-employed

The OTS are seeking a wide range of views from taxpayers, agents, businesses, platforms and others, e.g. software providers, via meetings, an online survey and potential wider media. They will also hold in-depth discussions with HMRC and the Treasury.

Anyone wishing to get involved should contact the OTS by 30th August at [email protected].

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