A report from the Institute of Directors (IoD) is calling on government to allow people to earn up to £10,000 per year tax free through the “sharing economy”
The IoD report, which is in response to a government consultation on how to support the “Sharing Economy”, recommends that the amount earned in the sector before income tax applies should be pegged to the personal allowance, which is currently £10,000 per year.
The IoD report, Share the Wealth, (published Tuesday 25th Nov) says that “the principle enshrined in the successful “Rent a Room” scheme – which currently allows a tax-free income of up to £4,250 – should be extended to recognise areas of the asset sharing economy, such as room rentals, asset hire and ride sharing. “
The rent a room scheme which was introduced in the early 1990s is a good example of tax allowance lag where government benefits by not increasing allowances year on year. So, if the original tax free allowance had been adjusted for inflation over the years it would be not far off £10,000 today in any case.
As a first step the allowance, set eighteen years ago, should be raised to £6,960 to take into account inflation over the years, before being raised in line with the current personal allowance of £10,000.
The report’s author, Jimmy McLoughlin, Deputy Head of Policy at the IoD, says:
“The Government has made clear its desire to establish the UK as a global leader in the sharing economy, and we welcome this commitment. At its simplest, the sharing economy is about letting people make the most of their assets and the Government should establish a tax regime that encourages and supports this.
“The original Rent a Room allowance was brought in as recognition that thousands of people had the means and opportunity to supplement their income in this way, and our proposals represent a modernisation of that same understanding.”
The IoD has also undertaken research among its members to assess attitudes towards the sharing economy.
45 per cent said they would not yet feel comfortable interacting in the sharing economy with people they don’t know. Just 35 per cent said they would.
Related to this lack of trust in using sharing economy services, 85 per cent of IoD members said some form of insurance would be important to them.
“Trust is central to the success of the sharing economy, and there isn’t much that Government can do to engineer this. There may be a role for a Government-backed identity verification scheme, but trust in this sector is generally earned by buyer and seller being alive to the importance of retaining a good trust rating.
“If the sharing economy is to expand beyond young, urban participants then it’s going to have to rise to the challenge of dealing with the concerns of people who are perhaps not used to running their lives via a smartphone.
“We expect that insurance and identity confirmation services will develop alongside the growth of sharing economy providers. We already see them in various forms with larger platforms such as AirB&B, eBay and Uber.
“The UK is extremely well placed to maximise the social and economic benefits of the sharing economy and the Government has a good model to follow in developing the right regulatory framework, based on last year’s regulatory proposals on crowd funding and its current review of digital currencies.”
Individuals should be able to earn £10,000 a year tax-free in the “sharing economy” by renting out things they own: their spare rooms, cars or other assets, the business leaders’ group said.
— Tom Entwistle (@EntwistleTom) November 26, 2014