The government is considering establishing tougher VAT regulations for businesses in the sharing economy, including Uber and Airbnb.

In a recently published ‘call for evidence’ document the government said that although the sector creates huge opportunities for the UK economy, it is aware that the sharing economy could “potentially create certain challenges to the VAT tax base.”

The government said that, where appropriate, it would develop policy responses to ensure fair competition and a level playing field for all businesses.

The document says that sharing economy digital platforms are enabling “unregistered individuals, micro-businesses and small-scale enterprises to market their services to an extremely large audience of potential customers, in a way that would be much more difficult for a traditional small or microbusiness to achieve.”

It added that in certain cases: “the underlying service provider on a digital platform may not satisfy the criteria which HMRC would use to classify an individual or entity as being ‘in business’ for VAT registration purposes.”

In such circumstances, the activity in question would be outside the scope of VAT, for example, a consumer-to-consumer transaction.

Share Story: