Price hike fears for Uber and Airbnb customers amid reports Rishi Sunak is planning to impose VAT in a multi-billion-pound tax raid
- Sunak considering toughening up VAT rules on ‘sharing economy’ businesses
- Many have grown rapidly in recent years to become hugely successful
- Treasury is examining ways it could levy VAT on these transactions
Users of taxi app Uber and accommodation booking site Airbnb face higher charges under a reported multi-billion-pound tax raid being plotted by the Treasury.
Many of these services have grown rapidly in recent years to become hugely successful.
Users of taxi app Uber and accommodation booking site Airbnb face higher charges under a reported multi-billion-pound tax raid being plotted by the Treasury
But customers do not pay 20 per cent VAT because drivers or accommodation owners offering services earn less than the tax threshold and are not employed directly by the sites, which act as intermediaries.
The Treasury, which is desperately seeking ways to raise cash after spending £280billion on measures to combat the coronavirus crisis, is examining ways it could levy VAT on these transactions.
In a ‘call for evidence’ from digital providers and their competitors, it said there was a need to ‘ensure fair competition and a level playing field for all businesses, whether operating in the sharing economy or as a traditional business’.
It pointed to research which found the value of transactions of platforms such as Uber, Airbnb and ‘odd-jobs’ app Taskrabbit is set to rise from £7billion in 2016 to £140billion by 2025.
Chancellor Rishi Sunak is considering toughening up VAT rules on so-called ‘sharing economy’ businesses as he tries to repair Britain’s battered finances after the pandemic
Many of these services, such as Airbnb, have grown rapidly in recent years to become hugely successful
Applying VAT to those sales could bring in £28billion for the Treasury – almost 70 per cent of the annual defence budget.
Collecting this money could help plug the hole in Britain’s finances following the pandemic, which the Office for Budget Responsibility estimates could balloon to between £21billion and £46billion by 2025.
But VAT charges on the app services could see increased costs passed on to their customers, millions of whom use them every day to book taxi rides or holiday lets.
A Treasury spokesman said last night: ‘The sharing economy has grown rapidly over recent years. This growth is to be encouraged, but it also creates VAT challenges.
‘The growth risks eroding the VAT base, which provides revenue for essential public services, as more people buy services from non-VAT registered service providers. We want to hear views on these challenges and kick-start a conversation.’