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Tax loss and workers' rights concerns drive gig economy inquiry

14 February 2017

New standards of work for both the public and private sector is being called for by the chair of the government's inquiry into new forms of flexible working.

Matthew Taylor, who is also head of the Royal Society for the Encouragement of Arts, Manufactures and Commerce, says that some businesses are using new ways of working and self-employment to avoid tax.

This is compounded by a complicated tax system and confusion over legal requirements, leading to clashes between employers and employees, including the recent Pimlico Plumbers court case.

Mr Taylor also referred to the emerging gig economy, largely driven by the Internet of Things, where workers are paid per task completed, resulting in a fall in revenue for the Treasury.

It was also recognised that many workers enjoyed the flexibility of being able to choose the hours they worked. Referring to the rise in self-employment and loss of Treasury revenue, Mr Taylor said:

"There are reasons why that might be a good thing in terms of how those people are working, but it is clear to a certain extent what is actually going on is, people are creating forms of work for themselves, or businesses are creating forms of work, to try to avoid tax.

 "I think what should drive businesses is efficiency, productivity, innovation - not trying to evade tax," he said.

An improved system would provide more clarity for everyone and allow businesses to be "designed in the right way" said Mr Taylor, according to the BBC.

A report by the Trades Union Congress (TUC) also examines the rise of new ways of working.

In addition to issues of lower income and reduced levels of tax being paid, the study also raised concerns over increased claims for benefits as a result of reduced levels of pay.

The BBC also highlighted the results of research by the Institute for Fiscal Studies, showing permanently employed people pay 31% tax on their income, compared to 22% for self-employed people.

Those classed as self-employed also pay lower levels of National Insurance, said the report.

 Further concerns were also raised over companies avoiding National Insurance, maternity and holiday pay, with many also paying nothing towards absence through sickness.

With studies continuing on the topic of flexible working, there is the possibility of further announcements within the government's Budget statement due on 8 March, said the BBC report.

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