Uber have ‘welcomed’ the opportunity to review how VAT works in the modern economy

Global private hire operator Uber say they have ‘welcomed’ the opportunity to respond and review how VAT might work in the modern economy.

The comments come as part of an interview with Uber’s Regional General Manager for Northern and Eastern Europe, Jamie Heywood. In the interview conducted by TaxiPoint it was asked whether the change to drivers' worker status will mean the ride-hailing firm are now likely to be liable for VAT in the UK.

Jamie Heywood said: “The Supreme Court judgment concerns the status of drivers in the context of UK employment law and was not concerned with VAT, which is an entirely different regime.

“In December 2020, the Treasury launched a call on evidence on VAT and the sharing economy. As one of many stakeholders, we welcomed the opportunity to respond and review how VAT works in the modern economy. We, like many others, are awaiting the Government’s response.”

According to Jo Maugham, a barrister and Director of the Good Law Project, he believes the global ride-hailing firm could be handed a huge VAT bill valued in excess of £1.5billion after the Supreme Court provided workers’ rights to thousands of drivers across Britain.

The landmark gig-economy judgment has meant pressure has now intensified on HM Revenue & Customs (HMRC) to clamp down on the private hire operator. Uber have historically passed VAT liability to individual drivers who they had claimed were independent contractors, rather than workers.

There are three types of employment categories under UK employment law. These include: full-time employed, workers, and self-employed. However a grey area remains as employment status for tax law only includes two categories: employed and self-employed.

HMRC must now decide whether they should class Uber drivers as self-employed or employees. If HMRC classify drivers as employees, as a result of the recent judgment, it has been suggested that Uber could owe more than £1.5billion in VAT payments.

Jo Maugham said via social media in February 2021: “This is my estimate: Dara Khosrowshahi was briefing (and an insider suggesting) c.£1.5bn some eighteen months ago since which time Uber has accumulated significant further liabilities and interest.”

In accounts published on 8 October 2019, Uber London Limited (ULL) detailed their initial concerns, which included a possible £1billion tax bill to the Exchequer should the firm be classified as a ‘transportation’ company. The minicab app giants have always classified themselves as a software company which is exempt from the tax.

According to the accounts submitted, being classified as a transportation provider would result in 20% VAT on Gross Bookings or on the service fee that ULL charges the drivers, both retroactively and prospectively.

The accounts filed stated: “The Uber Group believes that the position of HMRC and the regulators in similar disputes and audits is without merit and is defending itself vigorously.”