Those with sole trader businesses who work within the so-called ‘gig economy’ could be hit with new VAT charges, as the government seeks to bring in extra money following the pandemic.
The government is considering applying VAT charges to gig workers, such as those who work as drivers via the Uber app or rent out rooms using Airbnb, as a way of recovering some of the money that has been spent during the COVID-19 crisis. Should this plan be put into action, people with sole trader businesses of that kind will face significant extra financial burdens, which could mean a further 20% added to the cost of their services.
Already the Treasury has put out a call for evidence, as it is worried that the move towards business activity being carried out via the internet – which the pandemic has accelerated – could end up costing it tax revenue of up to £20 billion each year. The gig economy has been predicted to be worth £140 billion within five years, whereas four years ago it was only worth £7 billion.
At the moment, many gig workers do not pay VAT, as few sole traders earn enough to meet the VAT threshold. This gives them an advantage over rival firms in terms of what they can charge for their services, but that could now be about to change. Those who might find themselves affected by these plans may decide they need to speak to an accountant for sole traders in Goole or wherever they live and work.