Uber is disputing
an HMRC VAT assessment of some £386m, reports Tax Policy Associates. This is a further challenge to the way Uber operates in the UK,
following its previous settlement in 2022 in respect of unpaid VAT.
Following that
settlement, Uber adopted a new approach – charging VAT on supplies of taxi
rides but on the basis that those supplies were within the scope of the tour
operators’ margin scheme (TOMS). Rather than charging 20% VAT on the full
amount of each fare, VAT was applied to the profit from each ride. HMRC now
appears to have challenged the use of TOMS and Uber is in the process of
appealing.
Uber had also
recently pursued the question of whether a licensed operator acts as principal
in relation to the supply of services to each passenger, with the High Court
confirming that it does – the implication being that other operators will now
need to charge and account for VAT on their taxi services, although not
addressing the question of whether this would be at 20% on the whole fare or
only on the margin. It does mean that, whatever happens in the Uber TOMS case,
the wider private hire industry will be affected. If Uber loses on the TOMS
point, taxi operators will need to start charging 20% VAT on the entire fare –
except for bookings made directly with the driver (where the driver would be
making the supply rather than the operator) which, as Dan Neidle points out, would seem ‘a very distortive result’.
Whatever happens
in the courts, the government could decide to act by changing the law. Neidle
raises several possible options including restricting TOMS, or reducing the VAT
registration threshold so that most/all taxi fares are subject to VAT
regardless of whether they are booked via an app or direct with the driver.
Bringing most businesses into VAT could also allow for a VAT rate cut.
Uber is disputing
an HMRC VAT assessment of some £386m, reports Tax Policy Associates. This is a further challenge to the way Uber operates in the UK,
following its previous settlement in 2022 in respect of unpaid VAT.
Following that
settlement, Uber adopted a new approach – charging VAT on supplies of taxi
rides but on the basis that those supplies were within the scope of the tour
operators’ margin scheme (TOMS). Rather than charging 20% VAT on the full
amount of each fare, VAT was applied to the profit from each ride. HMRC now
appears to have challenged the use of TOMS and Uber is in the process of
appealing.
Uber had also
recently pursued the question of whether a licensed operator acts as principal
in relation to the supply of services to each passenger, with the High Court
confirming that it does – the implication being that other operators will now
need to charge and account for VAT on their taxi services, although not
addressing the question of whether this would be at 20% on the whole fare or
only on the margin. It does mean that, whatever happens in the Uber TOMS case,
the wider private hire industry will be affected. If Uber loses on the TOMS
point, taxi operators will need to start charging 20% VAT on the entire fare –
except for bookings made directly with the driver (where the driver would be
making the supply rather than the operator) which, as Dan Neidle points out, would seem ‘a very distortive result’.
Whatever happens
in the courts, the government could decide to act by changing the law. Neidle
raises several possible options including restricting TOMS, or reducing the VAT
registration threshold so that most/all taxi fares are subject to VAT
regardless of whether they are booked via an app or direct with the driver.
Bringing most businesses into VAT could also allow for a VAT rate cut.
