Uber faces new pressure from crowdfunded VAT case UK lawyer claims app should be collecting tax and providing receipts to passengers The global ride-hailing group could be forced to pay hundreds of millions of pounds in backdated VAT if it loses the case © Reuters
On the surface, the stakes in Uber’s latest UK legal wrangle look surprisingly small: an activist tax barrister is relying on crowdfunding for a High Court claim demanding a VAT receipt worth a grand total of 56p.But if Jolyon Maugham QC wins, the case could force Uber, the global ride-hailing group, to pay hundreds of millions in backdated VAT to the UK tax authorities — adding to the pressure on what is already the most lossmaking private company in the history of “big tech”.
Mr Maugham heads up the Good Law Project, which brings strategic legal challenges to build the case for changes to the law. This case is part of a larger effort to address complaints that European governments have been too willing to let tech groups, including Amazon, Uber and Google, pay relatively little tax even as they generate substantial revenues.
The allegations in the case are small beer. Mr Maugham, a barrister at Devereux Chambers, argues that Uber was providing him with a service when he took a £6.34 ride from his office to meet a client, and is therefore obliged to provide him with a VAT receipt. If Uber was deemed to be a service provider, it would theoretically have to collect VAT of 20 per cent of every fare and give it to HM Revenue & Customs.
Last week Mr Maugham’s lawyers asked the High Court to force the company to provide him with a VAT receipt so that he can claim the money back from HMRC because the ride was a business expense. After National Insurance and income tax deductions, the barrister says he would have been 56p better off and is therefore claiming this in costs, plus the court fee of £563.Uber says it has no obligation to collect VAT or provide a receipt. It argues that it is only acting as an agent for self-employed drivers, rather than a service provider. Jolyon Maugham says Uber was providing a service when he took a ride, and is therefore obliged to provide him with a VAT receipt, which he can use to claim tax deductions because the journey was a business expense
A spokesman for Uber said: “Drivers who use our app provide transportation services to passengers and will be registered for VAT if they meet the threshold set by government.” The VAT threshold is £85,000, an income most Uber drivers are unlikely to cross.
“This has been the case across the taxi and private hire industry for decades. Black cab drivers, and the apps they use, operate in exactly the same way. This claim is fundamentally flawed on a number of levels,” Uber added.
In theory, if Mr Maugham were to win, HMRC would then be able to seek VAT payments for all of the rides Uber provided for the past four years.
He says that figure could be “substantial” based on publicly disclosed information about the number of drivers and their average weekly earnings. “It is perfectly plausible it could be £1bn,” he said. If other European tax authorities followed suit, there could be knock-on effects, increasing Uber’s potential bill, he adds.
Lawyers for Mr Maugham believe their hand has been strengthened by a UK employment tribunal ruling last year that Uber drivers were “workers” and therefore entitled to sick pay and paid holiday. In that case, the tribunal wrote: “The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous.
”For Mr Maugham, the main question at stake is one of public trust and the need for large businesses to set an example by paying their taxes.
In a witness statement filed with the High Court, he said the perception was widespread “that we in the United Kingdom tolerate US tech companies, in particular, engaging in financially meaningful tax avoidance. I believe this public perception damages what is described as ‘tax morale’ — the propensity of others to pay their taxes.
”HMRC declined to comment on the pending litigation, but said: “We take any claims of unfair VAT competition extremely seriously.”
Mr Maugham and the Good Law Project have raised £107,650 on CrowdJustice, a crowdfunding site, to bring the case, including a donation of £20,000 made by an organisation “connected with the black cab trade”. London’s cabbies have long opposed Uber, arguing it competes unfairly.
Mr Maugham’s solicitors, Edwin Coe, have applied for a cap on legal costs so he can pursue the case without incurring huge liabilities.
David Green, a senior partner at Edwin Coe, explained: “This is a case of public interest and with public consequences.”
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