Taxi Driver Online

Sussex, I think the scheme regards paying only a marginal rate isn't really avoiding paying 20% to the Treasury - it's more about simplifying the administration, and using an estimate, essentially, rather than accounting for every transaction (which is one way cash runs could be dealt with if the likes of Delta are deemed to be the principal and has to charge VAT on every run).

So take a business buying and selling widgets.

They sell widgets for £1,000, and add £200 VAT to that.

But they bought the widgets for £800, plus they paid £160 VAT on that.

So normally they'd be liable for £200 output VAT to HMRC, less the £160 input VAT they paid, so they'd pay HMRC £40.

But that might be the total of numerous different transactions, which means a lot of administration and paperwork.

So an easier way is just to take the profit margin and apply the VAT rate to that, and work it out that way. In real world terms it's just and approximation. So the profit above, net of VAT, is £200. Applying the VAT rate to that gives £40, ie the same result as looking at the transactions individually.

But I'm assuming that's kind of how Uber have been doing it.

But I'm not sure precisely how they look at the input VAT side of things.

But don't the likes of Delta have to charge 20% VAT on their commission (or settle) at the moment anyway? So what does the judgement change?

Is it difficult, and as you alluded to before none of us are experts on VAT.

But the fella who owns the firm I work with charges the council, the NHS, and all of his accounts 20% VAT on the fare, not on his take.

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IDFIMH

Indeed.

But the new VAT is to the punter.

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IDFIMH

https://www.theguardian.com/technology/2022/mar/11/uber-fares-to-rise-by-20-across-uk-as-vat-is-applied#:~:text=The%20rise%20in%20fares%20comes,public%20transport%20in%20the%20city.

While the original ruling only applied to Uber’s business model in London, its biggest market, a spokesman said it was applying the changes nationwide in anticipation of further legal changes.

Which it did it's self on Friday, didn't it?

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now a licensed hackney driver

It should apply in England and Wales, and maybe even in Scotland, but getting council to act is no easy task.

Same could be said about HMRC, but usually they do get around to it.

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IDFIMH

Edders your example is kind of what I don't understand.

Say it's a £10 fare before Uber's VAT change.

Then Uber added the VAT on to the fare, according to the reports at the time, so the fare would become £12.

The driver's share is effectively an input for Uber, but there's no VAT on it because the driver isn't registered for VAT.

But everyone's happy, because Uber has just added the £2 onto the fare, and HMRC gets £2 in VAT, and Uber and the driver get what they did previously.

But the TaxiPoint article says Uber just pays VAT on their margin, which to me means effectively VAT on the commission or settle, which is essentially how it's done at present - the operator will charge VAT on settle, presumably.


If VAT is only payable on the margin, that would assume that drivers are charging Uber input VAT, which isn't the case, presumably.

So either Uber fares didn't really go up 20%, or if they did it's Uber that's benefiting from the extra revenue rather than HMRC (and the driver has lost out because Uber extracted a lot of the 20% extra on fares by upping the commission rate substantially).

Anyway, if operators do end up paying VAT only on their margin from each trip, then I can't really see Friday's decision having the financial impact that was claimed, and fares don't need to be hiked by 20%.

Either that or I just don't understand it all

I think that's the point; the judgement says that the point where the booking is taken i.e. the operator is responsible for VAT i.e. the WHOLE turnover

my example illustrated a scenarion where fares weren't put up by 20% to add the VAT on but kept them the same and took VAT off to remain competitive if fares are put up by 20% then the drivers income is not affected

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lack of modern legislation is the iceberg sinking the titanic of the transport sector

Well I'm finished with the number crunching at the moment

But suffice to say, it's an unpopular judgement for private hire operators.

Not much press coverage that I can see either, and certainly nothing that sheds any more light on it all. Apart from the Telegraph piece at the weekend, and one on the Mirror's site, it's mostly specialist accountancy publications and the like that are reporting it.

Uber report their financials in the next day or so.

Usually hidden in the small print is the not so nice stuff that the financial press miss.

I think a large VAT liability issue will be present there.

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IDFIMH

I will be very surprised if operators don't have to pay the 20% on the whole fare.

VAT on the margin has been ruled out by a number of cases involving our trade. Is the financial situation in the country so good that HMCR will simply feel sorry for the trade and change its stance?

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IDFIMH

So, Sussex, what does that passage in the TaxiPoint article mean? (Presumably written by a lawyer or accountant close to the case.)

It seems to be saying that Uber is only paying VAT on the margin, and that the other big apps have followed suit.


On closer inspection, that first sentence of the second paragraph reads a bit oddly, though. I mean, haven't Uber agreed their VAT position with HMRC? The sentence reads like it's all a bit speculative and up in the air.

Maybe the two paragraphs above are just wishful thinking and propaganda on behalf of Delta and Veezu, though. Maybe they're hoping that HMRC will let them pay VAT simply on the margin rather than the wording actually reflecting what's happening with Uber.

But as I understand it the application of the marginal scheme depends on VAT being levied on the inputs. The main inputs for private hire operators is, as far as I can work out, the drivers' share of the fare. Which won't include VAT, because the drivers aren't VAT-registered.

I had this discussion with a colleague a few years ago. He said that his accountant had told him that he would only have to account for VAT on the margin and because that margin was below the VAT threshold he didn't have to register. He still does the same now and has never had an issue with the VAT man. His turnover in some years was around £500,000.

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Grandad,

in essence this ruling overules that unless the Delta case confirms it but I suspect with tax generation a priority the customs and excise will be keen on the former as raising tax revenues from our trade is going to be a lot less unpopular in an election year than raising PAYE or NI or corporation tax rates

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lack of modern legislation is the iceberg sinking the titanic of the transport sector