Providing a clear definition of what supplies are within the sharing economy, and international harmonisation are vital when planning for VAT, according to ICAEW.
In December, HM Treasury launched a call for evidence on VAT and the sharing economy asking for insights on its size, scope and future development, and on how VAT may potentially need to change as transactions fall outside the regime.
Treasury’s focus is essentially on where consumers use a digital platform, such as Uber or AirBnB, to access services from an underlying provider.
ICAEW’s response, published as ICAEW Rep 28/21, emphasises that unambiguous legal definitions will be the keystone to any policy changes with regards VAT and the sharing economy.
It states: “There needs to be a very clear definition as to what is considered to be within the scope of the ‘sharing economy’. In addition, regarding being within the scope of VAT, clearer definitions regarding the meaning of ‘taxable person’ and ‘consideration’ will be required.”
In particular, the faculty warns that there are “potentially major issues” with barter-type supplies for which there is no or little money transacted.
Throughout its response ICAEW references the OECD’s work on taxing the sharing economy and argues that international alignment will be needed for compliance. For example, it argues that the UK’s place of supply rules must be harmonised with other countries and regions to avoid double taxation.
It concludes that the place of supply should be the location of the customer in all cases, and that the rules should be amended so that the nature of the customer (business or consumer) makes no difference. It suggests that a global One Stop Shop for digital platforms maybe be an option to boost compliance.
The faculty also argues that any changes to VAT legislation must not differentiate activities carried out via platforms and those carried out face to face – which would discriminate against digital platforms.
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