In this series of videos Ian Hyde, the head of our tax disputes team, talks to Adrian Lifely about the tax compliance burdens HMRC have put on large businesses to police the gig economy. In part one they take a look at why HMRC faces difficulties in ensuring taxpayers in the gig economy pay their taxes.
Read the transcript.
Watch the full series:
AL: Hello, my name is Adrian Lifely, I am a Disputes Partner at the Law firm Osborne Clarke. This is the first in a series of four videos on the topic of HMRC using large corporates as a policeman for tax collection. This is a very interesting and topical subject and I'm very pleased to be joined to take us through this topic by Ian Hyde who is also a Partner at Osborne Clarke and is head of our Tax Disputes practice. Ian can you give us a bit of context to this please?
IH: Yes, there's a problem that the Revenue have with the gig or sharing economy, which is that there are typically a large number of workers, self-employed, contractors who are below the Revenue radar essentially. That is difficult for the Revenue to find where they are and to ensure that they are paying the right amount of tax.
AL: And why is this a concern for General Counsel and large corporates?
IH: Well a lot of the rules that have come out and are evolving still, create effectively regulatory risks for General Counsel, so it's probably best to see them along the same lines as Bribery Act or Money Laundering regulation. So it affects the corporate rather than just being a matter of how much tax the corporate pays. It's probably worth putting this in some sort of context that the Revenue have changed how they behave with large corporates, that large corporates now don't indulge in tax avoidance, that's largely historic. But the Revenue are very aggressive in the amount of tax they collect, how they enforce that and their view of large corporates being good citizens and paying the right amount of tax has changed a lot in recent years. Against that background, these regulations have now become part of that brand risk that comes with tax, that a large corporate will not want to be seen on the front of certain newspapers or being interviewed in a Parliamentary Committee. So, General Counsels who are, in my experience, very focussed on risk and brand as issues as much as legal issues, should really be bringing this in to the sort of things they are thinking about.
AL: Ian, you mentioned the gig economy in particular, I'd like to just explore with you why all this affects the gig economy in particular please.
IH: Yes, the gig economy is a new phenomenon and it's great for creative industries but it creates a tax problem. The Revenue don't know where a lot of the self-employed IT contractors or other workers in that economy are so they are not tracking the tax. One study put it at a £8.3 billion of income tax was under-declared and a large part of that would be the gig economy. So the Revenue want to try and find these individuals, they can't find them but large corporates will be engaging with these corporates, whether they're IT contractors working for the banks or they are people selling goods on platforms. Those sorts of engagements are useful to the Revenue. So what the Revenue are doing is, by the regulations that we will be talking about, is trying to ensure that the large corporates either stop trading with fraudulent contractors who aren't declaring their taxes deliberately, provide information on those contractors to the Revenue so the Revenue can go find them themselves or actually take the tax risk on board as a large corporate.
AL: Thank you Ian, that plainly those are quite serious consequences for large corporates and in our next video we will indeed look at those issues in some more detail. But thank you Ian Hyde for now.
IH: Thank you.