HMRC remains in neutral on Uber's VAT question
The clock is ticking for HMRC to act if it ever hopes to pounce on Uber’s disputed VAT bill.
It’s been a tough year for Uber. The Silicon Valley unicorn’s founder, Travis Kalanick, was ousted after numerous gaffes, it had its license revoked to operate in London by TfL, and it has faced numerous legislative setbacks.
Of concern here, however, is an employment tribunal judgment which said Uber is supplying transportation services. It’s a decision that’s been backed by an advocate general at the European Court of Justice, and Jolyon Maugham, a specialist tax barrister.
Les Howard, a frequent AccountingWEB contributor and VAT expert, agrees with this assessment, too: “The question is: are they supplying transport services? My view is that they are. It follows therefore that there’s a VAT liability.”
If it is indeed the case, it has serious implications for the ride sharing service’s tax bill. It means that Uber should be charging VAT to customers and paying it to HMRC.
As Maugham pointed out on his blog, “that’ll be true not just now, but for the whole period for which Uber has operated in the UK”. Uber has been in the UK just north of four years. Uber’s annual VAT bill could be in the hundreds of millions.
But HMRC could be running out of time to act, Maugham told AccountingWEB.
HMRC can, of course, collect any unpaid taxes -- but the law imposes a limit on how far back in time the taxman can go. In the case of VAT, that limit is a maximum of four years. “There’s a strictly limited time period,” Maugham explained. “If you don’t raise it in that period, you lose the ability to challenge them.”
Given these time statutory limits, it’s standard procedure for HMRC to raise what’s called a “protective assessment”. As Maugham explains: “You raise a protective assessment when time is about to run out.”
The indication is that HMRC hasn’t done this in the case of Uber. The tax authority, of course, doesn’t discuss individual cases, and could be conducting a covert investigation. But if they are, then they are hiding it well.
And Uber hasn’t heard a peep, either; an Uber spokesperson told the FT that HMRC has “never opened a formal investigation into its approach to VAT” nor has it received a protective assessment letter.
“It’s absolutely remarkable to me that there’s a very strong possibility Uber has a VAT liability and HMRC are failing to protect the public purse by investigating it,” said Maugham. “If they’re liable, they will get away with it because HMRC hasn’t raised a protective assessment. That’s a matter of profound concern.”
If HMRC does swoop, and it turns that Uber does owe a big VAT bill, Les Howard is concerned about the “knock-on effects” it could have.
“It would affect the taxi sector. Because where taxi firms and drivers engaged with Uber, if Uber’s affairs are changed, all those drivers have to redo their tax returns. I don’t know how that would work.
“I saw a VAT return of an Uber driver yesterday. I don’t fancy figuring it out. You’ve got all the knock on of: are they on the flat rate scheme or not? Have they bought or sold cars or not? The contractual point is there, too: Could they sue Uber? There’s a large knock on effect.”