Until now, it’s Uber’s corporation tax dodging that has come under public scrutiny. Its VAT liability -not so much. But all that’s about to change.
Uber’s VAT problem arises out of a basic tension in its business model. The Uber brand is all about selling to passengers. The very front page of its website invites passengers to “Ride with Uber.” But its contracts pretend – as the Employment Tribunal found last year – that it is selling not to passengers but instead to drivers. And facing in two directions at once is always going to cause you problems.
And the VAT problem it causes is this: Uber’s contracts says its drivers are supplying passengers with transport services. And the Employment Tribunal agreed that passengers were being supplied with transport services. But it said that the passengers were being supplied with those services not by the drivers but by Uber.
And all of this matters because the drivers are below the VAT threshold. They earn, by and large, less than £83,000 a year and so, if they are supplying transport services to passengers, they don’t have to charge VAT.
But if Uber is supplying transport services to passengers for VAT purposes, well, we know it earns more than £83,000 a year. And so it has to charge VAT. And then something has to give.
The drivers get paid less or fares go up or Uber’s commission falls.
And there’s also a pretty big hit to Uber’s balance sheet. It will owe HMRC very substantial back tax: all the VAT it hasn’t paid over the last four years. And it will very likely owe back taxes not just in the UK but all across Europe.
Now, it’s really HMRC that should be having this fight with Uber. But it’s got a feeble record of taking on the big US tech companies.
And at the Good Law Project – which is bringing this fight – we’re not confident that it’s up for this fight. And so we’re going to take Uber on.
Our director is a Queen’s Counsel, specialising in tax. And we’ve taken formal advice from another Queen’s Counsel, also specialising in tax. And they both reckon Uber should be charging VAT.
So next week we’re going to launch our challenge. Check it out over at http://www.GoodLawProject.org. The Queen’s Counsel and solicitors who will act in the challenge will do so at very discounted rates.
But Uber is a mighty beast – you don’t need us to tell you that. And so, if we’re going to have this fight, we’ll need all the financial help you can give us.
So please, come on over, sign up for email updates, have a look and if you can – when we launch the case – make a contribution to the costs.
Link to crowdfunding – https://www.crowdjustice.org/case/uber/
source and thanks to our friends at: : London Cab Drivers Club