Contractors' Questions: Is it less taxing hiring via online platforms?

Contractor’s Question: Are there any legal or tax implications to taking on freelancers and contractors via online platforms to work for my consultancy? Can they simply be paid per job, and tax is their responsibility?

Expert’s Answer: The fact that you would be engaging these freelancers via online platforms, rather than by more traditional routes, will not affect the tax treatment.

As long as they are genuine freelancers, therefore, they can be paid in the same way as any other supplier, without any requirement on your part to withhold tax or to make any report to HM Revenue & Customs. In this case, the freelancer would be responsible for their own tax liability. You should note, however, that if you are VAT-registered, and would be seeking to reclaim any VAT included in your payment, you would need to ensure you obtained a properly prepared VAT invoice.

If in practice there is an employment-type relationship between your consultancy and any of those you engage, then the usual obligations to process payments to employees through a payroll scheme will need to be considered (although you should note that if the worker engages with you through their own company, any obligations in this area will fall onto that company rather than on you).

You should ensure that you enter into appropriate contracts with your freelancers/contractors, and indeed the online platform might well provide some level of assistance with this process. As well as providing you with important legal protection, these contracts might also provide evidence as to the tax status of the freelancer, assuming of course that they reflect the commercial reality of your relationship with them.

The expert was Andrew Constable, tax partner at chartered accountancy firm Kingston Smith LLP.