Chancellor considering tougher VAT rules for gig-economy private hire firms like Uber

Image credit: HM Treasury (Flickr CC2.0)

The Chancellor is considering tougher VAT rules for gig-economy firms like Uber and Airbnb as the Government looks to claw back much needed public revenue.

The ‘Call for Evidence’ launched by HM Treasury will seek stakeholder views in the sector on the Government’s assessment of the VAT challenges created by the Sharing Economy.

There have been concerns that the fast growing gig-economy, which now contains over 5 million people, has chipped away at the VAT tax group because many of those working do not earn enough to register for the tax.

In the five key Sharing Economy sectors, which includes short-term accommodation, passenger transportation, on-demand household services and on-demand professional services, the UK could see a twenty-fold increase in the total value of transactions to £140billion in 2025. According to analysis conducted by PwC, the sector was worth just £7billion in 2016.

In the policy paper ‘details’ released by HM Treasury, it reads: “The Sharing Economy has empowered individuals and business to connect with consumers and provide services to them on a far larger scale than previously possible. This activity is usually facilitated by digital platforms which can be based anywhere in the world.

“This creates huge opportunities for the UK’s economy and society through stimulating enterprise and aiding optimal use of scarce resources. However, the government is also aware that it could potentially create certain challenges to the VAT tax base.

“The aim of this call for evidence is to test the government’s view of the VAT challenges the Sharing Economy creates. We welcome stakeholder views, both those who may share our initial assessment and those who bring challenge to that perspective as well as evidence of other challenges that we have not yet considered.

“We are also seeking stakeholder views on potential next steps in evaluating and responding to these challenges.”

Whilst the consultation paper did not mention any specific companies, it did provide an example of the shared-economy which usually consists of hiring labour or renting assets. The paper read: “An example of combining labour and assets would be a driver offering passenger transport using their personal car.”

Responses to the call for evidence are to be submitted before 4 March 2021. That date is before an expected budget which was postponed from this autumn due to the effects of the pandemic.

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