Income Tax and VAT
All taxes on revenues are currently payable in Sterling, whether Income Tax or VAT.
The Inland Revenue draws a distinction between two types of exchanges:
All commercial exchanges are subject to VAT.
Social exchanges, where something is offered as 'favour' for a friend.
The Inland Revenue regards social exchanges as outside the tax system.
Account-holders are responsible for their own tax affairs. System administrators are not required to report to the Tax authorities. However, the authorities may access information on a specified account-holder through due legal process.
LETSystems Administration and Tax
Data Protection Act
Unemployment Benefit issues
The main problems for claimants centre around the 'availablility to work' and earned income issues.
In general, the authorities may regard local mioney earnings as income to be declared and will make appropriate reductions to benefits.
Local money earnings may be deducted from benefit if they exceed the allowable disregard.
Income support may be stopped if claimants are working for more than 16 hours a week even if they are paid in local money.
Claimants are therefore advised to check the regulations very carefully and to act accordingly and responsibly.
Any 'activity' by disabled people may be interpreted as being fit for work. This effectively excludes disabled people from the use of standard LETSystems to provide services. This does not exclude them from buying or selling goods or receiving services through the LETSystem.
However, special LETSystems designed specifically for disabled people only, using non-money equivalent measures, such as hours or gifting, may well be possible.
Relationship to Government
However, since local currencies are likely to dramatically change almost all aspects of government action - revenues, budgets and programs, there is good reason for governments to pay close attention to LETSystems development.
Our recommendation is that governments do not directly initiate LETSystems but provide encouragement by co-operating, facilitating, communicating, reviewing economic strategies.
We also recommend that they participate, accepting rates and local taxes in local money, or using local money in their internal structure.
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