Uber under fire as many drivers pay no VAT

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Uber are in the media being accused of dodging VAT. This is a really interesting case as effectively Uber operate similarly to a traditional ecommerce marketplace in that they attract customers and claim to connect them with individual drivers who fulfil the contract.

Uber say that though they collect the money, each of their around 40,000 drivers are individual businesses each liable for paying VAT themselves… although most of their drivers run a business with too small a turnover for VAT registration to be a requirement. This puts Uber drivers at an advantage to competitors who are VAT registered enabling them to either charge the same and be more profitable or to charge less and undercut rival operators.

“Uber respects the local tax regulations in each country in which we operate. Drivers who use our app provide transportation services to passengers and are therefore liable to pay VAT in relation to their activities, including the service fee they pay to Uber, if they meet the thresholds set by the government. This threshold varies from country to country and in the UK it is currently £85,000. The same rules apply to any international service provider with customers in the EU.”
– Uber

Uber doesn’t even have to charge VAT on their fees, billing from their Dutch subsidiary they make use of the EU reverse charge VAT provision as a legal loophole which has infuriated Margaret Hodge who also hauled the likes of Google, Facebook and Starbucks before a parliamentary select committee.

“It is yet another example of how large companies find loopholes and use the law for a purpose for which it was never intended. There is a failure to pay tax that should be due. That reduces the money available for public services and is unfair on Uber’s competitors.”
– Rt Hon Dame Margaret Hodge

It’s easy to point at Uber’s situation and make a snap judgement that they should be forced to collect VAT for every fare paid. However before you’re too quick to do this, imagine if such a ruling also applied to eBay, Amazon and every other marketplace you trade on. If they collected VAT on every sale on your behalf then you’d be paying VAT regardless of whether you were registered for VAT or not and which VAT scheme you may be on (those on Flat Rate and Margin Schemes would definitely end up paying more VAT than was due).

Would you like to see marketplaces as government appointed VAT collectors which would at a stroke ensure that overseas sellers would see VAT charged on their transactions even if they weren’t liable (remember that could also be you being charged VAT in Germany, France and other EU countries – even if you’re UK VAT registered it would complicate your accounting and VAT returns). Or do you think the status quo, whilst not perfect and with loopholes, is the better of two evils?

3 Responses

  1. I’ve not met a Taxi driver in a long time that isn’t self employed. Most firms seem to operate in the same way as Uber, where the base is a business and the work is essentially out-sourced to a third party. The drivers then pay the base a weekly “fee”, which keeps the cogs turning.

    Unless what I am seeing is simply a regional thing, this isn’t having any impact on Uber’s competitors at all.

  2. personally i think the entire system should be a level playing field. All should pay VAT and then claim it back. After all, as a typical customer, everything i buy has VAT added on so if one company has to pay that VAT to the treasury then all companies should too then they can claim it back. I have all too often in the past been stung by “+ VAT” prices where no VAT receipt is given, even after continued requests so this would level the playing field. Enforcement however would be the tricky part

  3. I agree with Gaz…

    I thought as a court ruled that Uber drivers should not be classed as being self employed then VAT would be payable, unlike other taxi drivers that are self employed. However, Uber have been given the chance to appeal this decision.

    VAT should probably be charged to the drivers for the service that Uber provide to them, if they get the ruling over turned, like Ebay will soon be charging VAT on their service charge, but as they are exempt under the EU reverse charge VAT provision, then they do not.


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