Uber and Airbnb customers could expect price increases of 20 percent as part of the Rishi Sunak plan to collect billions of pounds in VAT on a tax attack on apps
- Sunak is considering tightening the VAT rules for companies with a “sharing economy”
- Many have grown rapidly in recent years to become extremely successful
- The Treasury Department is currently examining how VAT can be levied on these transactions
Users of the Uber taxi app and Airbnb accommodation booking site will have to pay billions of pounds higher in fees as part of a billions of pounds in taxation planned by the Treasury.
Chancellor Rishi Sunak is considering tightening VAT rules for so-called "sharing economy" companies in order to repair the battered UK finances after the pandemic.
Many of these services have grown rapidly in recent years and have proven extremely successful.
Users of the Uber taxi app and Airbnb accommodation booking site will have to pay billions of pounds higher in fees as part of a billions of pounds in taxation planned by the Treasury
However, customers do not pay 20 percent VAT because drivers or property owners who provide services earn less than the tax threshold and are not directly employed by the locations that act as intermediaries.
The Treasury Department, desperate for ways to raise cash after spending £ 280 billion on measures to combat the coronavirus crisis, is currently exploring how it could impose VAT on these transactions.
In a “call for evidence” by digital providers and their competitors, it was stated that “fair competition and a level playing field must be guaranteed for all companies, regardless of whether they operate in the sharing economy or as a traditional company”.
It pointed to research that found that the value of transactions made with platforms like Uber, Airbnb and the Taskrabbit app for odd jobs is expected to increase from £ 7 billion in 2016 to £ 140 billion in 2025.
Chancellor Rishi Sunak is considering tightening VAT rules for so-called "sharing economy" companies in order to repair the battered UK finances after the pandemic
Many of these services, such as Airbnb, have grown rapidly in recent years and have proven extremely successful
Applying sales tax to these sales could raise the Treasury Department £ 28 billion – nearly 70 percent of the annual defense budget.
Raising this money could help fill the gap in UK finances following the pandemic, which the Office for Budget Responsibility estimates could rise to £ 21 billion to £ 46 billion by 2025.
However, VAT on the app services could pass on higher costs to customers, millions of whom use them every day to book taxi rides or vacation rentals.
A spokesman for the finance ministry said yesterday evening: “The sharing economy has grown rapidly in recent years. This growth is to be encouraged, but also creates VAT problems.
& # 39; Growth could undermine the VAT base that generates revenue for essential public services as more people buy services from non-VAT-liable service providers. We want to hear views on these challenges and start a conversation. & # 39;