Publication - Research and analysis

Collaborative economy: evidence analysis

Published: 22 Aug 2017
Energy and Climate Change Directorate
Part of:

Analysis of responses to the call for evidence issued by the Scottish Expert Advisory Panel on the Collaborative Economy in April 2017.

73 page PDF

712.6 kB

73 page PDF

712.6 kB

Collaborative economy: evidence analysis
7 Implications For Taxation

73 page PDF

712.6 kB

7 Implications For Taxation

7.1 This section provides an overview of responses around tax implications of the collaborative economy. A range of respondents raised issues in relation to tax implications, including businesses, business representatives, public sector, other organisation and individual responses.

Opportunities for the collaborative economy

7.2 Relatively few respondents referred to taxation in relation to opportunities for the collaborative economy. The points noted below are based on a small number of business, business representative and individual responses.

7.3 A business respondent and an individual referred to the potential for the collaborative economy to deliver benefits for taxation revenue by supporting additional economic activity. An individual respondent also referred to potential benefits associated with the collaborative economy, and cautioned that the approach to taxation should not seek to 'tax away' collaborative business models.

7.4 In terms of potential regulatory changes to address these concerns, a business representative respondent wished to ensure that these changes would not reduce the current preferential treatment of the genuinely self-employed. An individual respondent also saw an opportunity for tax incentives to be introduced for co-operatives, within the collaborative economy and more widely.

Challenges for the collaborative economy

7.5 Comments on taxation and challenges for the collaborative economy focused primarily on the extent to which providers using collaborative platforms are subject to the same level of taxation as other businesses. Several respondents raised concerns regarding the structure of collaborative platforms, including suggestions that in some cases this appears designed to minimise overheads and taxation. This included concerns that collaborative businesses are using bogus self-employment to avoid tax, and reference to platforms being domiciled overseas such that corporation tax is not paid within the UK. A business representative respondent also suggested that government considers the taxation of individuals with 'worker' status, seen as potentially applying to some collaborative economy service providers. Some respondents suggested that any differential in taxation of collaborative and traditional providers could lead to unfair competition.

7.6 A small number of respondents focused specifically on peer-to-peer sharing, and suggested that this could undermine tax revenues. This included reference to a range of specific issues such as providers of peer-to-peer accommodation paying Council Tax rather than business rates [24] , providers not being subject to VAT, and the current £7,500 per annum rent a room tax-free allowance. This included some who also felt that peer-to-peer sharing could lead to greater automation of services, which could further reduce tax revenues through job displacement.

7.7 Finally in relation to taxation, a business representative respondent referred to the need for better information on providers using collaborative platforms, to support enforcement of tax legislation.

Protection of contributors

7.8 Several respondents raised concerns regarding the potential for collaborative platforms and providers using these platforms to pay lower levels of tax than other businesses. This included specific concerns around use of self-employment status, and the extent to which this is an accurate representation of providers' status.

7.9 In this context, some respondents wished to see a change in tax legislation and enforcement - although a business representative respondent noted that any action in relation to taxation of the collaborative economy should not disadvantage genuinely self-employed people in the tax system. A business representative respondent suggested that government considers the taxation of individuals with 'worker' status, seen as potentially applying to some collaborative economy service providers. It was also suggested that HMRC should be provided with sufficient resources to enforce compliance with the tax system across the collaborative economy.

7.10 A business representative respondent also suggested that the tax system could be used to improve protections for providers of services across the collaborative economy. This included a specific proposal that the principle of auto-enrolment for pensions should be extended to self-employed workers, and that the tax return could be used to achieve this.

Balancing regulation with competition and innovation

7.11 Several respondents raised concerns regarding a perceived disparity in tax burden for collaborative platforms and traditional businesses. This was highlighted as distorting competition between collaborative and other service providers, and as potentially leading to a significant loss of tax revenue as the collaborative economy continues to grow.

7.12 In terms of specific areas of concern, respondents referred to peer-to-peer accommodation providers' tax liability being reduced by the rent a room scheme, collaborative platforms being structured to minimise their tax liability, VAT being levied only on the service fee element of peer-to-peer accommodation costs, a lack of data from collaborative platforms on service providers, and concerns that some providers may be failing to fully declare their income via the collaborative economy. A business representative respondent also referred to challenges for regulatory and tax systems in dealing with an increasing share of business activity being conducted from domestic premises.

7.13 In relation to approaches to tackle these issues, a business representative respondent highlighted potential for information collected through the tax system to support enforcement of regulations.

Barriers to growth of the collaborative economy

7.14 Only one respondent (a business representative body) directly addressed taxation in relation to potential barriers to growth of the collaborative economy. This response referred to potential for changes in the tax system to help resolve barriers to growth. This included reference to simplification of tax declarations as a potential benefit to self-employed workers within the collaborative economy. This respondent also highlighted a need to improve understanding of tax exemptions for individuals in the peer-to-peer accommodation sector.

The role of government

7.15 The need to ensure fair and appropriate taxation was highlighted by a number of respondents as a key role for the government. The following specific points were made by respondents in relation to the government's approach to taxation and the collaborative economy:

  • Several respondents felt that ensuring collaborative economy businesses contributed to tax revenues fairly should be central to the government's role. This reflected specific concerns around the extent to which some collaborative providers do not pay tax in the UK.
  • Advice and clarification of tax regulations was also seen as a significant role for government - through for example, publishing guides for workers and employers.
  • An individual respondent highlighted the importance of access to and sharing of data in terms of ensuring fair taxation across sectors.
  • A business respondent suggested that the government should consult widely on any proposed changes to taxation.
  • A transport representative respondent suggested that any long-term plans to replace drivers with autonomous vehicles would be a significant threat to tax revenues.


Email: Corey Reily,

Phone: 0300 244 4000 – Central Enquiry Unit

The Scottish Government
St Andrew's House
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