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Uber's UK accounts - true and fair?

11 Oct 2017


 

  

Vaughan Williams has been a very busy man of late, known for producing successful theatrical works such as Titanic and The Knowledge, which is currently half way through its 12 week run at the Charing Cross Theatre, a lot of people are unaware that Vaughan in a previous life was a Deloitte Chartered Accountant.

Upon learning of this we felt that it would be remiss of us here at TaxiPoint not to exploit Vaughan's talents so we spoke to him and asked him to give an assessment of Uber's tax situation.


Vaughan Williams said "There has been a flurry of comment around the filing of Uber London Limited's Report and Accounts for the year ended 31/12/16. 


This has included speculation that the company's turnover can serve as some sort of proxy for its UK activities.

Unfortunately that is not the case.

Uber London Limited provides marketing and other services to other Uber companies ( I suspect in the Netherlands, let's call that " Uber BV " ) .

In terms of fares, Uber London Limited ( the registered PH Operator with TfL ) performs only an agency function, i.e. it represents Uber drivers in dealing with riders and presumably represents Uber BV in dealing with drivers. It is not acting as a principal.

Uber London Limited earns income by charging Uber BV for its marketing/representative services on a cost-plus basis. This means that if Uber London Limited's expenses are ( say ) £20m, them it just sends a bill to Uber BV for £20m plus the contractual cost markup - so if that was 10% then the bill would be for £22m. That way it cannot run out of money and will always show a modest profit.

Meanwhile, if customers pay a £20 fare, it is paid on to the driver on whose behalf Uber London Limited operates, and the driver pays commission for access to the app to Uber BV.

So you can't use the Uber London Limited figures to calculate anything like daily hours worked per driver, number of drivers, UK turnover etc.

I don't think the primary reason for this structure is to conceal Uber's UK turnover so that they can overstate their size on a " too big/important to fail " argument or overtly price below cost . Those may be considered useful secondary benefits, they may not.

I think it is far more likely that the structure is for fiscal efficiency. I understand that locating the intellectual property of the app in the Netherlands means that there is no VAT payable on the commissions paid to Uber BV, which there would be if it were located in the UK.

Regarding taxes on income, Uber globally makes substantial losses. It would be fiscally inefficient to declare large taxable profits and pay tax in one jurisdiction while making losses ( which could only be carried forward against future local income ) in others. Locating all the European income ( and expenses too, bar the small markup ) in Uber BV allows the group to offset losses made in newer markets against profits made in more mature jurisdictions.

The amount of tax that Uber pays on the UK is therefore pretty optional, the cost-plus method of remuneration for Uber London Limited will keep the charge modest, while allowing Uber to say that it DOES pay UK Corporation Tax.

One thing that's puzzled me. Everyone says that Uber is price-dumping, supplying services below cost, pricing in a predatory manner etc, which may or may not be true. Yet at the same time they complain that Uber pays little or no Corporation Tax.

Well it wouldn't, would it ? You pay tax on profits, not losses or turnover. One follows the other.

I suppose the argument is that a disruptive competitor like Uber " invests " its shareholders' money in discounted fares to " build market share " ( aka put competitors out of business ) . A normal company is more profit-based than turnover-based, so is likely to pay more tax, which many people think is a social responsibility for corporations.

Uber users are presumably able to bribe their own consciences with cheap fares.

Net effect ? .... investors lose money now, Exchequer loses tax, users gain short term via lower fares.

So is Uber using its billions to subsidise UK fares ? Or are its drivers the ones paying the price of cheap travel for Uber's riders ?

Is Uber in London much smaller than everyone thought ? ... if it is, then there has been a lot of complaining about congestion, competition etc that must have been figments of people's vivid imaginations . Plus we have TfL registration figures that suggest substantial growth, albeit in what appears to be an expanding market.

From Uber London Limited's accounts, however, I'm afraid there is no way of knowing."

 

 

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