HMRC could be forced to pay Uber £500m after VAT legal defeathttps://www.telegraph.co.uk/business/20 ... al-defeat/HM Revenue and Customs could be forced to repay almost £500m to Uber after a legal victory over the taxman by a rival minicab app.
Bolt, the Estonian start-up and Uber’s main competitor in London, has won a tax tribunal case against HMRC over the VAT it must pay on rides.
The decision could have implications for Uber, which is challenging the tax authority over the same issue in a separate case. Uber has paid hundreds of millions of pounds to the Exchequer in recent months while it disputes the charges, but is hoping to recoup the money.
The Bolt judgment could also shield passengers from rising fares, which were expected to come in if the tax was widely applied across the industry.
Apps like Uber and Bolt as well as other private hire operators have been forced to pay VAT in the UK since a court defeat in 2021, which radically changed how their businesses were legally defined.
However, HMRC and the companies have clashed on how much they must pay.
Uber said in November it had paid £493m to the authority in extra charges related to the dispute but hoped to recover it back on appeal. Its bill was raised from £386m earlier in the year after an “updated assessment” from HMRC.
Uber has argued that VAT should only be applied on the fees the company charges drivers, typically 25pc of a journey, while HMRC has said it should be applied to the full cost of a ride.
In the tax tribunal, Judge Greg Sinfield ruled that “mobile ride-hailing services” such as Bolt should be treated under the Tour Operators Margin Scheme, designed for holiday companies such as travel agents.
The ruling states that the company should only pay VAT on the company’s own fees, rather than the entire journey cost.
Jonathan Main, VAT partner at law firm MHA, said the Bolt decision had “major implications for taxi operators in London”.
“This is a significant win for all private hire businesses in London which will significantly reduce the financial pain across the sector,” he said, adding that minicab operators in the capital would be able to submit claims for overpaid VAT over the last 16 months.
While the decision strictly applies to operators in London, Uber has been charged VAT by HMRC across the country amid ongoing legal cases about how it applies outside the capital.
HMRC said it was assessing the implications of the Bolt decision. A spokesman said: “We are disappointed with the ruling and are carefully considering the tribunal’s decision.
“Our view remains that the Tour Operators Margin Scheme (TOMS) does not apply to minicab businesses.”
Uber did not comment on the Bolt ruling but warned that fares would rise for millions of people if it was forced to charge VAT on the full cost of a ride.
It said: “This could increase fares for millions of people across the country, which would have a significant impact on those who rely on this essential service.
“There is no VAT on trains, buses and coaches, and, as a key part of the UK’s transportation network, we believe that private hire trips should remain affordable for the people who rely on them.”
Uber fares have already risen sharply in recent years amid surging demand and a shortage of drivers.
Bolt did not comment on the tax tribunal victory. Mr Main said it was likely to be appealed to an upper tribunal.
Uber is expected to hear its similar case in the tax tribunal in the new year. The company has said it plans to “vigorously defend” its position. Tax experts have said the situation may ultimately take several years to be settled without intervention from the Treasury.
Jeremy Hunt, the Chancellor, has said he will look at the implications of the 2021 court ruling, which made private hire fares liable for VAT. The Treasury has said it will consult in the New Year.
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