The UK’s HM Treasury has requested public feedback on whether the VAT rules should be changed to account for the new “sharing economy,” facilitated by online digital platforms like Uber and Airbnb. Comments are requested by March 3, 2021.
The paper, released December 9, notes that online platforms make it easier for individuals and businesses that are below the VAT registration threshold to sell services in the UK. The paper asks if existing policies should be changed to require the platform to become responsible for VAT on the supplies that underlying service providers make to consumers.
The paper also notes that existing VAT rules for cross-border business-to-business supplies of services prevent the UK tax authority from receiving VAT on the commissions that foreign digital platforms charge to underlying service providers if the service provider is a small operator trading below the UK VAT-registration threshold. HM Treasury asks if these VAT rules should be changed, as well.
Finally, HM Treasury asks how it can develop measures that ensure compliance by offshore digital platforms and their underlying service providers.
HM Treasury said that the government’s thinking in this area is only preliminary; action may be required, though, as the new sharing economy is reducing the UK-VAT base and use of the platforms is increasing.
The UK could see a twenty-fold increase in transactions conducted through online platforms in the following five sectors by 2025: collaborative finance, short-term accommodation, passenger transportation, on-demand household services, and on-demand professional services, the paper notes.
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