Transport

Should the rest of the sharing economy get a tax break?

By Oliver Smith 9 February 2016
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Hiyacar co-founders Graeme Risby and Rob Larmour.
Summary

Airbnb has boomed in recent years, but its success in the UK hasn’t been entirely of its own making, now other sharing economy apps want the same treatment.

Britain’s Rent a Room scheme was launched in the early 1990s, long before Airbnb was even a twinkle in co-founder Brian Chesky’s eye.

As its name suggests the original purpose of the Conservative-backed scheme was to encourage people to rent their spare rooms and earn up to £4,250 tax-free from renting.

Fast-forward to today and the rise of online room renting services like Airbnb has seen Rent a Room uptake soar, and from April the Government will increase this tax break to the first £7,500 earned through room rentals.

Read more: Does Airbnb herald the death of the hotel?

Given the success of Rent a Room and the boom in room sharing businesses benefitting for it, today there’s chatter that this allowance could rise even higher and calls for it to be extended to other

Tax breaks for all

Before the Government’s Autumn Statement a group of business leaders from companies in the sharing economy called on the Chancellor George Osborne to increase the scope of the Rent a Room scheme to cover all businesses in this fast-growing sector.

“The sharing economy has become a movement and new businesses are springing up,” Debbie Wosskow, CEO of Love Home Swap and chair of the trade body which represented the businesses, Sharing Economy UK, said at the time.

“This tax break needs to keep pace with that change of force and disruption in our economy.”

Wosskow called for a wide-reaching £10,000 Sharing Economy tax break, to cover everything from people renting spare rooms, to even people who rent out their empty driveways.

Read more: How To Boss It Like… Debbie Wosskow, CEO Love Home Swap

But the Autumn Statement came and went without a mention of any new Sharing Economy tax allowance.

Driving home the message

“Generally cars are people’s second biggest outlay after their houses, so if we can get a tax break for sharing your car it’ll incentivise and stimulate a whole new sector of the sharing economy,” Graeme Risby, CEO of Hiyacar, told The Memo yesterday.

While the car sharing sector has yet to take off in the same way that room rentals have, Risby says the tax question is the final hurdle for many people who would otherwise consider renting out an unused car.

“And there’s the environmental side, every car shared is 10 new cars off the road, so if people start sharing a car to work then that’s less cars on the road.”

Companies like Hiyacar and Rentecarlo have already overcome challenges like arranging insurance and breakdown cover for their customers, but without a tax-free threshold drivers haven’t been incentivised to rent out their car, but that could soon be changing.

In the last few months since the Autumn Statement Risby along with other members of SEUK have met with both MPs and HMRC who seem to be coming around to the idea.

“We’ve had several meetings and recently met Andrew Jones MP, Parliamentary Under Secretary of State at Department for Transport, who was really open and really keen to do something about this.”

Risby says the meetings left him with the impression that the Government was in favour of extending the tax allowance, first to peer-to-peer car sharing services, and eventually to the entire sharing economy.

Until that happens Risby and his peers will have to continue disappointing potential car renters when they ask the key question new Hiyacar customers ask.

“If I hire out my car just once, do I have to pay tax?” For now, yea you do.

The Memo has reached out to both the Department for Transport and the Treasury to clarify what the Government’s current position is on extending the free tax allowance beyond Rent a Room is.