Uber on collision course with HMRC over £1bn VAT dispute
Neil Warren wonders why it has taken so long for the nature of supplies made by Uber to be considered by HMRC.
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It took HMRC so long because they've been putting all their talent..cough- into MTD!
This will be an interesting case though.
Interesting use of the word talent. Having got past that one though, 100% agree with you.
"...the recent suggestion that Uber drivers are employees rather than self-employed. "
No, the status of the Uber drivers was decided as 'workers' not employees.
I understand Uber are appealing to the Supreme court over the Court of Appeal decision.
'the government will push up the cost to the customer by 20%, and almost certainly reduce the tax take as Uber will become less competitive'
Why will the tax take reduce? Uber will then charge the same as other tax firms and won't have the VAT advantage to undercut them.
Your response is standard - gig economy response - " if we (UBER/AMAZON etc) pay taxes we will not be able to operate and drivers/stock pickers will lose their jobs" in reality a lot more people lose their jobs because of Gig economy. UBER has workers and they should pay VAT - just as they should also meet rules applied to other taxi drivers, whether doing the knowledge, police checks or having their car serviced.
I agreed HMRC have not been stringent enough on the likes of UBER/Deliveroo/Amazon but perhaps now they will be start to apply them. To at least even the playing field for law abiding businesses ( shops on high streets, taxi drivers, small businesses) who are hammered even if they unwittingly break the rules as they cannot afford high priced accountants and lawyers.
I've never met a genuinely self-employed taxi driver who earned enough to charge VAT. I'm sure there are some but I believe in the minority.
If Uber lose the VAT case, they won't "pay" VAT, their customers will, all they will do is collect it from the customers and give it to HMRC.
Simple solution - completely ban VAT.
Yes, minority. Those doing school transport and other stuff on the side rake it in well enough and easily enough for six figure turnover.
Not seen many ‘competitive’ tenders. Tax payers as well as pupils being taken for a ride.
"Tax payers as well as pupils being taken for a ride"
I thought that was the general idea.
This is only one of the VAT issues with Uber; admittedly it is the bigger one and it is the one where HMRC that loses out.
The other is (or certainly was a year ago) to do with the drivers, some of whom are VAT registered and some of whom are not.
This means that if your driver is not VAT registered and you are charged £24 and that is what the driver gets (after Uber takes its bite). You have paid no VAT and you have no VAT to recover.
If however the driver is VAT registered and you are charged £24 that would normally be £20 fare plus £4 VAT but Uber does not issue VAT invoices so you have nothing to support a claim to recover that £4.
So the driver gets £24 less what Uber takes and pays over the VAT that he has collected from you.
So Uber is not losing out here, nor is HMRC (on this bit), and the VAT registered driver is paying what is due.
The one who is being stuffed is the passenger who cannot recover the VAT that he has paid because he has no VAT invoice.
This is only one of the VAT issues with Uber; admittedly it is the bigger one and it is the one where HMRC that loses out.
The other is (or certainly was a year ago) to do with the drivers, some of whom are VAT registered and some of whom are not.
This means that if your driver is not VAT registered and you are charged £24 and that is what the driver gets (after Uber takes its bite). You have paid no VAT and you have no VAT to recover.
If however the driver is VAT registered and you are charged £24 that would normally be £20 fare plus £4 VAT but Uber does not issue VAT invoices so you have nothing to support a claim to recover that £4.
So the driver gets £24 less what Uber takes and pays over the VAT that he has collected from you.
So Uber is not losing out here, nor is HMRC (on this bit), and the VAT registered driver is paying what is due.
The one who is being stuffed is the passenger who cannot recover the VAT that he has paid because he has no VAT invoice.
This situation highlights a more fundemental problem, in that our society has gone through a revolution over the last 20 years, with advanced technology and our economy being inevitably dictated to by globalisation. Whilst commercial enterprises and invested in order to cope with these changes, the government led legal, political, financial and tax systems have not. This causes the type of problem raised here, as well as many others.
What I find interesting in all this is that its an illustration of 'how things turn out'.
There is no doubt that the original intent of the Uber developers was to provide software/app facilities to match up potential passengers with potential drivers.
It made very good commercial sense, so that Uber were assured of their 'cut' for them to act as intermediary in cash collection - the fact that this was an 'added convenience' for many drivers being a good outcome for all - esp. as many normal people don't care about figures till tax return time when it all comes as an annually recurrant 'orrible shock.
It is also to be noted that Uber design was originally under USA's IRS thinking. It always comes as a surprise to USA companies that not every regime matches their own.
Once people became 'dependent' on Uber their, and the authorities, view of it altered and the likes of payments for Holidays etc. arose - leading eventually to the workers/employment and VAT discussions.
I contend that what Uber intended to provide and what they have ended up being are poles apart and the new parameters are outwith Uber's intended design - with all the consequential headaches that has brought.
One wonders how to flag this type of danger to entrepreneurs in general - who can tell what the predation of the authorities will incur.
Just pay your taxes dudes. You're a huge business, you turnover a ton of money and employ a lot of drivers who enjoy the benefits of using Uber's client reach and service vs having to trawl for punters and wait on the rank.
Not yet.
When driverless cars come in and Uber drops all of its drivers then it will.
At that stage it will no doubt have a plan to get around the VAT "problem".
Maybe drop the VAT threshold so it only really covers hobby/small side gig earnings.
The high threshold is an unfair advantage in a lot of businesses.
Uber London Limited is operating on a temporary two month licence extension from its regulator, Transport for London.
It still does not have a normal licence because it has yet to satisfy TfL that its practices and procedures are sufficient to be deemed a fit and proper company to provide services to the public.
The VAT problem appears to be symptomatic of its general attitude towards complying with the law.
This is a unique problem to the UK due to the ludicrously high VAT reg threshold. Drop it to say £10k and this problem vanishes.
Dealt with this problem 30+ years ago when local taxi company was client and challenged by HMRC. We won and I recollect it was because the company was owned by the drivers so it was clearly an agency for them and, I think, the principle of unjust enrichment prevented any reclaim for earlier years as the company could not trace the customers to pass on any VAT
I'd rather HMRC concentrate resource on the Corportaion Tax issue, with Costa now owned by Coca-Cola, US based Cafe Nero and Starbucks and with all of us buying "stuff" in Luxembourg who is actually paying for Britain's infrastucture?
I'd rather HMRC concentrate resource on the Corportaion Tax issue, with Costa now owned by Coca-Cola, US based Cafe Nero and Starbucks and with all of us buying "stuff" in Luxembourg who is actually paying for Britain's infrastucture?
I'd rather HMRC concentrate resource on the Corportaion Tax issue, with Costa now owned by Coca-Cola, US based Cafe Nero and Starbucks and with all of us buying "stuff" in Luxembourg who is actually paying for Britain's infrastucture?