Taxman under fire for failing to probe Uber stance on VATBritish MPs have criticised HM Revenue & Customs for failing to investigate Uber’s approach to value added tax, as the ride-hailing company engages in a high-profile legal battle over its tax affairs. Uber claims it has no obligation to collect VAT on rides because it only acts as an agent for self-employed drivers, rather than a service provider. But a landmark UK ruling last year found that Uber’s 30,000 drivers in London are workers, rather than self-employed contractors.
A spokesperson for Uber said the company has held regular discussions with HMRC, but the UK tax authority has never opened a formal investigation into its approach to VAT. The company also confirmed it has not received a “protective assessment” letter from HMRC. Protective assessment letters often precede investigations.
Meg Hillier, the Labour MP who chairs the public accounts committee, said it was “extraordinary” that the tax authority had not formally investigated Uber’s approach. “HMRC has been slow to react to new business models. It needs to be much more adept at working out how working practices are changing and the disrupter businesses out there need to be examined.”
Margaret Hodge, the longtime Labour MP who preceded Ms Hillier as chair of the committee, said HMRC’s “persistent reluctance to test the questionable financial practices of some companies in the courts” was a “scandal of the UK tax system”. “It’s plain common sense that HMRC should be investigating the VAT issue and other tax issues in relation to Uber,” she said. “If Uber fails to pay its proper VAT bill, that only means other taxpayers have to pay more or more public services have to face even deeper cuts.”
A spokesperson for HMRC said the authority does not comment on individual companies, but said: “Multinational companies must pay all taxes due and we don’t settle for less. We subject large businesses to an exceptional level of scrutiny. HMRC actively investigates more than half of the UK’s largest businesses at any one time.”
Jolyon Maugham, an activist tax barrister, lodged a High Court claim in May demanding a VAT receipt from Uber. He described HMRC’s failure to investigate Uber’s tax arrangements as “outrageous”. “It’s a genuine scandal that, if Uber is to be believed, HMRC is not querying its VAT arrangements,” he said.
Mr Maugham argues that Uber provided 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. His claim for a 56p VAT receipt will be heard in the High Court in November. If his case is successful, it could eventually lead to the company being forced to pay hundreds of millions of pounds in backdated taxes to UK authorities.
“I do find it surprising that a large business with an innovative business model has escaped HMRC scrutiny, particularly when it seems to have been structured with tax in mind,” said Dan Neidle, a partner at Clifford Chance, the law firm. “It is reasonable for the public to expect HMRC to be more proactive.”
An Uber spokesperson 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. “This has been the case across the taxi and private hire industry for decades. Black cab drivers, and apps they use, operate in exactly the same way,” they added. “This claim is fundamentally flawed on a number of levels.”
Uber’s latest UK accounts, filed earlier this month, showed the company paid £551,174 in tax in Britain last year on £3m of profit. Uber is separately embroiled in an ongoing wrangle with Transport for London, which revoked the company’s operating license in the capital. Uber has appealed against the decision, objecting to TFL’s finding that the ride-hailing service was not a “fit and proper” operator.
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