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UK VAT gig and sharing economies consultation

The UK Treasury last week launched a public consultation on the taxation of the gig economy – ‘VAT and the Sharing Economy’ Its aim to redesign the tax system which is struggling to fairly capture revenues from a sector estimated to be worth £140bn by 2025. The two threats the UK and other governments see is a large, untaxed activity and the tax handicap it creates for traditional businesses.

The Treasury will be reviewing five sectors under the review:

  1. ride sharing;
  2. accommodation sharing;
  3. household services;
  4. professional services; and
  5. collaborative finance.

The principal issue is the over 5 million UK self-employed workers who now operate in the sectors generally do not generate enough income to pass the VAT registration threshold, £85,000. They therefore legally avoid indirect taxes.

OECD and EU reforms for gig & sharing economies

Beyond VAT, the Treasury is concerned problems for other taxes – particularly income tax. The OECD Gig and Sharing economy VAT study had reviewed many of the related issues. The EU’s VAT in the Digital Age proposals for 2022 release will look to reform: transaction-based reporting(including e-invoices); VAT treatment of platform economy (gig and sharing platforms); and the single VAT return which covers extension of OSS and IOSS to all B2C transactions and to B2B for the first time.

VAT Calc’s Advisor and Auditor services can help on determining and reporting the correct UK VAT on gig and sharing economy transactions around the world.

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