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Sharing economy, caring about tax

Posted on 30 January 2018 by Nilufer Rahim, Research Director
Tags: tax

Our recently published report, commissioned by HMRC, describes the current nature of the ‘sharing economy’ and its implications for tax payment. 

Also known as the ‘collaborative’ or ‘peer-to-peer’ economy, the sharing economy can mean different things to different people. For the purposes of our research we refer to money-making activity facilitated by digital platforms and apps that enable people to share, sell or rent their property, vehicles, resources, time, or skills. It can include a wide variety of activities including renting out space, selling handmade crafts and offering delivery services.

Using this definition, our research estimates that around 11% of the working age population in Great Britain (roughly 5.3 million people) take part in the sharing economy as ‘providers’.

The most popular types of activities are buying items to resell, such as on platforms like Ebay or Amazon (44% of everyone involved in the sharing economy), selling crafts e.g. on Etsy (22%), and renting out a space through platforms like Airbnb (19%).

We found that work flexibility was a key attraction for participating in the sharing economy and that for the majority of people, the sharing economy offered an additional source of income. In fact, over half saw their activities informally as ‘just a way of making some extra money’, rather than as formal employment or self-employment. 

A quarter of respondents said they knew very little or nothing at all about how their sharing economy income is taxed. While our evidence shows that on the whole people want to comply with their tax requirements, many said they wanted more support and information from HMRC and sharing economy platforms around tax obligations and reporting.

Our report highlights a number of opportunities and challenges posed by the sharing economy. It offers income generation, employment opportunities and unlocks underused assets. However the informal nature of much of the sharing economy may pose a risk of lost tax revenues due to the non-declaration of income by people who are not aware of their tax obligations.

Nilufer would like to thank Katriina Lepanjuuri for her help with this blog. 

Follow Nilufer on Twitter: @nilufer30172263

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