Treasury eyes meet self-employed gig employees with gross sales tax
Self-employed Uber drivers, those who make a living renting out rooms on Airbnb, and other gig economy workers might have to pay VAT.
The Treasury Department plans to pay VAT to self-employed gig workers and others in the sharing economy as it seeks to reclaim cash to help fund the Covid pandemic.
This means that Uber plans or Airbnb stays could cost 20 percent more.
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The Treasury Department has issued a call for evidence amid growing concerns that up to £ 20 billion in tax revenue could be lost if activities shift online. According to PwC, the total value of the UK sharing economy will be £ 140 billion by 2025, compared to £ 7 billion in 2016.
For example, the plumbing company Pimlico Plumbers charges their customers 20 percent VAT, but a plumber at Taskrabbit doesn’t because most sole proprietorships are below the £ 85,000 sales tax threshold. Similarly, accounting firms charge their clients VAT for billable hours, but a freelance accountant found on Upwork may not.
While the government has pledged not to raise the VAT rate under the “triple tax lock”, nothing prevents it from expanding the number of paying businesses or lowering the £ 85,000 threshold – in France and Germany VAT starts at below sales from £ 30,000.
VAT currently brings in £ 160 billion a year for the Treasury Department.
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Chris Sanger, EY’s global tax chief, told The Times, “The tax system typically tries not to differentiate between different types of business models. Now it provides an incentive for the sharing economy and the self-employed, and this creates a risk for the treasury. “
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