Taxi Driver Online

Not sure if this is as significant as it looks - outside of London at least, this simply means Uber is doing the same as the likes of Delta and Veezu etc?

Anyway, an angle I'd never really thought about - presumably this is all significant as regards the likes of TfL-plated cars working in Kent and Essex, and Wolves-plated cars working in London, both under sub-contracting arrangements used by the same operator?

So, most obviously, someone booking an Uber could be sent a car with different VAT arrangements from day-to-day, depending on which operator licence they're working under - TfL on the one hand, or the an operator elsewhere in England on the other hand? (An Uber booked for Gatwick, for example, could be licensed by TfL or another operator, thus different VAT arrangements?)

Anyway, maybe the most interesting detail here is the bit about the commission rates


Uber swerves Rachel Reeves’s ‘taxi tax’

https://www.telegraph.co.uk/business/20 ... -taxi-tax/

Company rewrites contracts in a way that shifts liability for VAT to drivers

Uber is to avoid paying hundreds of millions of pounds under Rachel Reeves’s new “taxi tax” by rewriting drivers’ contracts.

The company has issued new terms to drivers outside of London that reduce its liability for VAT – just as the Chancellor closes a previous loophole it used.

Ms Reeves adjusted VAT rules in November’s Budget so that minicab companies would have to pay the 20pc tax on entire fares. The change will come into effect on Friday.

Currently, they pay it only on the commission paid to the companies – a fraction of the total passenger bill.

Uber’s new contract rewrites the legal relationship between the company and its drivers in a way that shifts liability for VAT to drivers.

Under what is dubbed the “agency” model, Uber effectively acts as a booking agent and it is drivers who contract directly with passengers, and are therefore liable for VAT.

Not only does this reduce Uber’s expected tax bill, it is also likely to deprive the Treasury of significant sums. Individual drivers would not be liable for VAT until they make more than £90,000 in bookings in a year, a level most are unlikely to cross.

Ms Reeves’s Budget change, which opponents had dubbed a “taxi tax”, was expected to raise more than £700m a year for the public finances and had led to warnings that fares would rise.

When announcing it, Ms Reeves promised that it would “improve competition in our taxi industry” and mean that “everyone pays fairly”.

VAT will continue to be charged on Uber’s commission, which has typically been around 25pc of the total fare.

The new contract will not apply in London, where the agency model is not allowed under Transport for London rules. As a result, Ms Reeves’s change means the entire fare will now be liable for VAT for journeys in the capital.

Uber has warned that fares are likely to rise as a result.

However, the changes outside of London are likely to mean the Treasury missing out on hundreds of millions of pounds. Uber’s business outside of the city is believed to account for just under half of its £5.2bn in UK minicab revenue last year.

Uber would have been liable for more than £600m in annual VAT payments if it was not allowed to use the “margin scheme” loophole closed by the Chancellor, according to US stock market filings.

The new contract also shows that the company can take a commission of up to 49pc on fares.

Uber took 20pc when it entered the UK and later changed it to 25pc – but it has since moved to a “dynamic” model in which its cut of rides varies. The new rate will move between 3pc and 49pc, according to the contract.

Uber said it was making the changes to keep its fares affordable, adding that the change brought it in line with others operating outside of London. It said its commission on fares was not rising.

A Treasury spokesman said: “Ending this use of a niche tax scheme by online minicab firms will both benefit everyday cabbies with a fairer tax system and raise money to help deliver the country’s priorities – cutting the cost of living, cutting waiting lists and cutting debt and borrowing.”

Uber previously operated an agency model across the country but abandoned it in 2021 after a judge ruled it was not allowed in London.

However, the Supreme Court ruled in the summer that minicab companies operating outside of the capital can deploy the agency model.

Before the Budget, Uber was locked in a legal dispute with HMRC over whether the margin scheme loophole closed by the Chancellor was valid, although HMRC had suffered a series of defeats in a parallel case against Uber rival Bolt.

Uber paid £1.4bn to HMRC between 2022 and 2024 while it disputed the charges.

Maybe if all the drivers claimed voluntary VAT registration they would be 20% better off on all things they bught in connection with their business. Fuel, 20% cheaper, maintenance and repairs, Uber charges 20% cheaper. Pass it on to customers, pay the difference to the vat man. I've been registered for years as a sole trader with turnover under the threshold, never had any problems, it works to my advantage in many ways.

That never crossed my mind, but the TfL driver working outside of London is going to cost Uber 20% more.

But how will Uber know if non-London drivers are VAT registered, in respect of the price Uber charges the punter?

So if a TfL driver picks up at Gatwick and takes a punter to central London, at a cost (he says, just looking up on the app) of £80, will Uber deduct the same VAT amount from a non-TfL driver?

Or will the VAT situation make Uber look to giving more work to non-TfL drivers? Or is that wishful thinking?

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IDFIMH

I wouldn't be shocked if when we eventually get new regulations regarding cross-border issues; the government would also put in new rules regarding the agency model outside of London.

It really doesn't make sense, from a government point of view, to have two different VAT requirements from drivers undertaking the same profession.

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IDFIMH

One of the other VATables will be airport pickup and set down charges, as well as parking. All VAT-deductable. And Costa coffe, McDonalds as meals away from regular place of work...

ONLY if you are away for too long a time i.e. the bulk of the day there are rules on this and the distance from home and time away come into play. I am assuming VAT conditions would be the same as income tax rules.


Why are we setting apart London and Non london when the new legislation will cover all of England and wales ? Uber will have had a lot of expensive legal advice and will have worked this out from that in fact I did suggest in an earlier thread that this was exactly what they would do.

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

Unfortunately that doesn't work in reality. Yes you can claim the VAT back but if you are not VAT registered any VAT that you have paid is just part of your expenses when you do your tax return.

Yes, Grandad, Roy's VAT glass is definitely half full, rather than half empty

Bottom line for the vast majority of the trade is, yes, if you're VAT registered then you can claim the VAT back on expenses.

But you'd now have to account for VAT on ALL your fares, which either means adding it on to current fares if you're private hire (not always easy), or taking the hit from your existing fare levels (which you'd have to do anyway if you're charging at council-regulated HC rates).

So, for the vast majority, don't register for VAT unless you have to.

Anyway, I think the compulsory VAT-registration threshold is £90k in fare income per annum, effectively. So unlikely to trouble the vast majority of drivers, at least

Pros and cons to each side of it. As my bus hire business is zero rated it works quite well for me.

the problem for uber is that unless they do they can't definitively prove that only the margins (their commission) is liable

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

I was going to mention that bit. When we did the stretched limos we were zero rated so yes we went VAT registered and it worked out very well for us even when we started doing school transport it was good because we just added the VAT to the invoices. It started to work against us when we sold the limos and started ordinary taxi work and then we had to account for the VAT on all the fares.

The answer is to get a more than 9 seat minibus on a restricted taxi licence. Surely you needed. psv licence for the limos?

The fact that "you" had to pay some vat or charge vat on cab fares still meant that overall you paid less vat the HMRC than you would through not being registered.

I'm just about to run the figures through my magic tendering spreadsheet to see how that pans out. I've just used that to work out my other half's costs of running her vehicle in connection with her work, travelling expenses, and it came to 44p per mile. It's a Landrover Discovery van. HMRC used to allow 45p per mile for business use.

That was the silly bit. The VAT rules only stated that the vehicle had to have been built or addapted to carry the 9 passengers. The rules didn't require the vehicle to be used for carrying 9 passengers so it was ok to license it for 8 passengers. We had the VAT man come out at the time to conduct an inspection because we had been charging VAT on the limo prices and They confirmed that this was correct and refunded all the VAT we had paid them. We did however have to write to all the customers who had paid the VAT, after all it was actually their money, and give them a credit note against further bookings.

Yes that was still good until we stopped doing the limos and only ran the taxis.