Taxman pursuing Uber for another £386 million in VAT

The taxman is chasing rideshare service Uber for another £386 million worth of VAT, after it paid a £615 million settlement last year.

As first reported by lawyer Dan Neidle of Tax Policy Associates, Uber revealed in its half-year results last night that HMRC “disputed the amount and manner in which we were applying VAT to our UK business”.

The San Francisco-based company had previously argued it was exempt from VAT because its drivers had been classed as self-employed. However, after a Supreme Court judgement required its drivers to be considered employees, it faced questions of whether VAT now applied.

In November of 2022 it handed £615 million to HMRC to resolve the claims.

The extra £386 million demanded by HMRC is because it challenged Uber’s application of a set of rules designed to simplify the tax for tour operators and similar businesses, which is also used by its rideshare rivals and minicab firms.

Under these rules, which apply to companies that transport passengers without meaningfully “altering” the service, VAT would only apply on Uber’s profit for each journey.

A spokesperson said: “Uber is seeking clarity for the whole industry in order to protect drivers and passengers.”

Uber argues that, without these rules, customers would end up paying more for journeys as they would be the ones paying VAT.

Uber will dispute the charge in court, but because of the rules around tax appeals, it was required to pay the total first, and will only get the £386 million back if it wins.

There is no date set yet for the court case, but it is hoped that the issue could be settled soon as other firms could also dispute the assessment.

Last week, Uber won a High Court case over how VAT was applied by private taxi businesses located outside of London,