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Driver sharing economy challenged by Uber ruling

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An employment tribunal’s ruling that Uber must pay its drivers the living wage is the latest sign of an official clampdown on sharing-economy services and those who benefit from them.

Uber driver in a car

Motorists who fancy making a bit of spare cash from their cars may need to think again, as the government and courts begin to crack down on sharing-economy services.

Last week, an employment tribunal ruled that the ride-hailing app Uber should treat its UK drivers as employees rather than self-employed contractors.

Extra overheads

The decision, which is likely to increase the firm’s overheads significantly and which could lead to a rise in passenger costs, is the latest sign of the complex regulatory and legal ground rules that are still being established in such services.

Part of Uber’s appeal to motorists was that they could register as drivers with the app and then take on as much or as little work as they liked.

But the tribunal’s ruling means that Uber may now have to pay drivers the living wage as well as national insurance on their behalf – and it will have to set up a pension scheme for those who earn at least £10,000 from the service.

This could well lead to fewer drivers being taken on or lower fares for those who do work for the company – although Uber has said it plans to mount a legal challenge to the decision.

Road at night

Cash from your car

Uber is among the most high-profile sharing-economy services in the UK at the moment.

But it’s not the only one that encourages people to make some extra cash from their cars.

Liftshare and BlaBlaCar are two companies which have been set up to match drivers with potential passengers for long-distance journeys.

Both have websites which let motorists post details of trips in the hope they can take a passenger along in order to share fuel costs – and for a bit of company.

Insurance obstacles

But there are potential issues with such services, particularly when it comes to motor insurance.

According to current guidelines from the Association of British Insurers, anyone who makes a profit from offering lifts – that is, they are paid more than the cost of fuel and depreciation – could find themselves in breach of their policy.

Glen Clarke at insurer Allianz says: “Informal car sharing is a sharing economy activity but many may not appreciate that due to the ‘hire and reward exclusion’ on a standard motor policy, they may not be covered.

“This exclusion prevents the hiring of the car to another or accepting profitable payment for a lift. However, if no profit is made from a passenger contribution to cover costs, the policy should remain valid.”

London taxi

Rental crackdown

Liftshare, for example, helps drivers avoid overcharging – and thereby putting their policies at risk – by estimating how much passengers should pay towards petrol or diesel bills using government-approved fuel-contribution rates.

Renting out space on your drive way, or another unused parking space, is another option to raise extra cash, for example if you live near a town centre, railway station, hospital or airport.

There are numerous platforms that can help you find someone to pay for a short or long stay, such as JustPark, ParkLet and ParkOnMyDrive.com.

But the government is increasingly cracking down on people who make money through such services to ensure they are paying the right amount of tax.

New tax break

Even though they are typically informal arrangements, payments from sharing-economy services such as these should be subject to income tax.

And officials are concerned that too many beneficiaries are failing to pay their fair share.

However, former chancellor of the exchequer George Osborne announced in his final Budget last March that a new tax allowance for money made through sharing economy services is to be introduced next April.

This means that individuals will be able to earn up to £1,000 a year from such services – and a further £1,000 by renting out property through platforms such as AirBNB – before income tax is liable.

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