III. THE UNITED KINGDOM: A VERY ATTRACTIVE TAXATION REGIME, WITH NO DECLARATIVE OBLIGATIONS IN RETURN
A. A SHARED OBSERVATION: CURRENT RULES ARE UNADAPTED
In recent years, the United Kingdom has adopted a specific tax system that is particularly favourable for income derived by private individuals from their activities on online platforms.
This change stems from a finding that applies both to the United Kingdom and to France: " The rapid growth of the digital and sharing economy means it is becoming easier for more and more people to become micro-entrepreneurs. However, for those making only small amounts of income from trading or property, the current tax rules can seem daunting or complex 104 ( * ) .
B. £ 1,000, £ 1,000 AND £ 7,500: THREE CUMULATIVE ALLOWANCES WITH NO OBLIGATIONS IN RETURN
The UK Finance Act of March 2016 created two allowances of £ 1,000 , cumulative, for income derived from online platforms ( sharing economy 105 ( * ) ), from which all private individuals and self-employed workers can benefit. Income lower than these thresholds, fully exempt from income tax, no longer has to be declared. These allowances are as follows:
- £ 1,000 on income derived from sales of goods or services ;
- £ 1,000 on rental income , such as the rental of an apartment on Airbnb , but also a secondary residence, a garage or storage space.
To these two general allowances is added a specific allowance of £ 7,500 on income from the rental of a room or a bedroom in a main residence 106 ( * ) . This allowance was created in April 2014 and set at £ 4,250, and doubled the following year.
On presentation of the Finance Bill for 2016, the Chancellor of the Exchequer, George Osborne, stated that these measures were the first tax advantage for the collaborative economy in the world 107 ( * ) .
C. AN EXCESSIVELY FAVORABLE REGIME?
The creation of these allowances, which in their principle are analogous to the Working Groups proposal, are considered with important reservations by the Working Group with respect to their highly favourable nature which lack any declarative obligations in return .
It is a fully intentional stance: during the course of the interviews conducted by the Working Group, in particular with political leaders, it appeared that the British Government intended to create a regulatory and tax environment that is highly favourable to the collaborative economy , by reducing restrictions on the platforms and their users as much as possible. The association representing online platforms, the SEUK ( Sharing Economy UK ), also stated that these measures were a great victory for Great Britain an opinion that, in particular, the representatives of the hotel sector did not share. This initiative must be understood in the more general context of the consequences of the referendum of 23 June 2016 on the country leaving the European Union (Brexit), after which sharp cuts in corporation tax and deregulation measures have been announced.
More specifically, the highly favourable nature of the British system lies in a combination of two elements:
- firstly, there are additional allowances, and not, as in the Working Groups proposal, alternative allowances to those of ordinary law, which would cancel each other out for people whose income is significant (see above). In other words, they amount to wholly exempting income of up to 9,500 pounds per year , provided this money is received via a platform, moreover regardless of the taxpayers annual income. This measure, not targeted on occasional or sideline income , could therefore constitute significant unfair competition to the detriment of traditional sectors, as well as a substantial loss of revenue for the Treasury;
- also, these allowances are granted with no obligation of automatic reporting or even an obligation of information in return, which makes the system potentially very permissive . Since the reporting formalities are the taxpayers responsibility, he could thus be encouraged to declare only income lower than the cumulative amount of the allowances, thus benefiting from a tax exemption while reducing the magnitude of any adjustment. During the interviews conducted by the Working Group, it appeared that automatic reporting, though regarded by several officials of the tax authorities and tax lawyers as the most efficient way to collect the tax and an inevitable solution in the long term , at this stage elicited too many reservations from the platforms and taxpayers to be envisaged.
These reasons led the Working Group to prefer a tax advantage focused on the small occasional and sideline income benefiting only those taxpayers who accept automatic reporting.
It should however be stressed that the British tax authorities are on the other hand very ambitious in fighting VAT fraud on the e-commerce platforms . The same UK Finance Act for 2016 has introduced a new joint and several liability (JSL) system for platforms for payment of VAT due by overseas businesses (outside the European Union), which sell goods to UK consumers.
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Joint and several liability of e-commerce platforms
The planned procedure has three successive components: 1. Through the platforms, the authorities can request online sellers in third countries which appear to be professionals to appoint a tax representative in the United Kingdom, responsible for payment of VAT instead of the seller or severally with him ( joint and several liability ); 2. If the VAT is not paid within 30 days, or if the tax representative is not appointed, the authorities may consider the platform as distinctly and jointly and severally liable to pay the VAT instead of the seller or severally with him ; 3. The warehouses ( fulfilment centres ) located in the United Kingdom which store goods sold by third country sellers, by 2018, will have the obligation to implement due diligencemeasures to ensure payment of VAT . The detailed instructions ( (Fulfilment House Due Diligence Scheme ) were published in December 2016. Source: Senate Finance Committee |
* 104 Source: HM Income & Customs , 16 March 2016 . Exact source not found
* 105 The term sharing economy is used in the United Kingdom in a very broad sense, and in practice covers the online platform economy.
* 106 For information, a typical hostusing Airbnb in London earns 3,250 pounds sterling per year.
* 107 Source: HM Income & Customs , 16 March 2016 . Exact source not found