Uber handed £615million VAT bill payable to HMRC next quarter

Ride-hailing giants Uber will pay HM Revenue & Customs (HMRC) £615million in outstanding VAT payments it was confirmed today.

According to sources, the agreement between the two parties was made yesterday (31 October).

It was originally feared that the ride-hailing giants could be slapped with a huge VAT bill valued in excess of £1.5billion after the Supreme Court provided workers’ rights to thousands of drivers across Britain in February 2021.

After a lengthy legal battle, Britain’s highest Court handed victory to Uber drivers for workers’ rights, which includes the right to earn the minimum wage and holiday pay.

The landmark gig-economy judgment put pressure on HMRC to clamp down on the private hire operator. Uber had historically passed VAT liability to individual drivers who they claimed were independent contractors, rather than workers.

In today’s Quarterly Financial Results for Q3 it was revealed that Uber would pay HMRC £615million next quarter (Q4).

The statement reads: “On October 31, 2022, we resolved all outstanding HMRC VAT claims related to periods prior to our model change on March 14, 2022. We do not expect any significant impact to the income statement as we have adequate reserves recorded as of September 30, 2022, related to this resolution.

“We expect a cash outflow of approximately GBP 615 million during Q4 2022 for this resolution.”

Will this affect other PHV operators?

Maybe. The Government recently revealed that HMRC are ‘considering any implications’ that may arise from changes to VAT payable by potentially 16,000 private hire vehicle operators. The result of this case could prompt back payments in a similar fashion to Uber.

Private hire operators from across England are concerned about the implications of an Uber and Sefton Council court case that could drastically impact the sector.

If ride-hailing firm Uber are successful, the changes could force contractual arrangements with drivers and make all operators the principal for VAT on fares. This is likely to force the price of journeys up.

Uber have long urged thousands of other private hire operators to follow their lead by making changes to their business models. Earlier this year, Uber made big changes which included paying VAT on all UK journeys following a similar court case in London.

Transport for London (TfL), the UK’s biggest licensing authority, warned ALL Private Hire (PH) Operators to take ‘IMMEDIATE ACTION’ to make changes to their terms and conditions and ensure compliance.

If Uber win their court case with Sefton Council, ALL licensing authorities outside of London could then be forced to follow suit.

In a House of Commons debate Daniel Zeichner, Labour MP for Cambridge, asked the Transport Minister whether she has had recent discussions with Cabinet colleagues on the potential impact of VAT levels on private hire operators.

Lucy Fraser, DfT Transport Minister, said: “I know the hon. Gentleman is a keen champion for this area, given that he is chair of the all-party parliamentary group on taxis. He will know that the question of whether a private hire vehicle operator needs to pay VAT depends on two factors: whether he is acting as principal or as agent; and whether he meets the VAT threshold. As he will also know, HMRC is responsible for VAT."

Zeichner responded: “There are 16,000 private hire operators across the country and an impending court case could change the complicated relationship between customer and operator. The worry is that if that change comes into effect, as a consequence of the court case, many small operators could be at risk. What plans does the Department have to deal with that contingency? Will the Minister agree to meet me and representatives of the industry to discuss that further?”

Frazer added: “I am aware of the litigation that he refers to. HMRC is considering any implications that that may have on VAT payable by private hire vehicle operators. As he will know, the Government keep all taxes under review at all times. I am sure that the Minister responsible for this area, Baroness Vere in the other place, will be happy to meet him.”