Research commissioned by HMRC on the sharing economy aimed to understand the extent of the sharing economy in terms of income of those participating for profit (known as providers) and the number and characteristics of the providers. The research also aimed to understand the attitudes and decision-making processes of providers in relation to the taxation of income generated through the sharing economy.
The sharing economy is defined for the purpose of the research as economic activity facilitated by the internet through digital platforms and applications that enable people or businesses to share, sell or rent property, resources, time or skills. These sharing economy platforms function by matching suppliers and customers through common platforms.
The report “Research on the Sharing Economy” published on 16 November 2017 estimated that around 11% of the working population take part in the sharing economy as providers. The total gross income generated by the providers in the sharing economy is around GBP 8 billion per year with a mean individual income per provider of around GBP 1,700.
Many of the providers surveyed had a low understanding of the tax system and of their obligations to declare and pay tax. This applied especially to providers who were new to the sharing economy and had not previously been self-employed. However most providers tried to comply with tax obligations and the higher earners were more likely to have the intention of complying.
Those who were not reporting their income often thought that their earnings were too small; that their activities were a hobby rather than a business; or that being a separate economic activity their earnings were covered by a separate personal allowance. Although some providers were aware of allowances available to them, such as the rent-a-room relief, they were often unaware of the exact level of the allowance and the circumstances in which it applied.
The report concluded that there is a need for more support and information from HMRC for participants in the sharing economy. Support on self-assessment and available allowances is especially needed by providers who are new to self-employment and tax reporting, or providers who do not have access to a professional adviser. Providers with multiple sources of income also need support in determining their taxable income. HMRC could work with platforms providing more tax-related information and appropriate links to further details. In some cases providers could be enabled to opt-in to sharing information on their earnings with HMRC so they could be given more specific advice.