Uber VAT Trick Exposed

The old adage that something that looks too good to be true may appear that way because it is too good to be true might easily be applied to driver and rider matching service Uber, which is now facing an exposure of its dubious business practices rather more damaging than anything that has gone before. That is because what is coming down the track at Travis Kalanick and his merry men is likely to hit them where it really hurts.

And the place where it really hurts is in their collective wallets, on that all-important bottom line. The thing that was always too good to be true was that Uber’s fares so easily undercut both taxi operations - like London’s black cabs - but also established private hire firms. How did they do it? Well, apart from throwing significant amounts of backers’ money at the problem, there was also the question of VAT.

Or, in Uber’s case, the question of No VAT being paid. But how could this be? Transportation services in the UK are subject to VAT at the going rate. Ah well. Uber have - up till now - had a way of dodging that one. As Business Insider has told, “since it claims drivers are all self-employed, it doesn't need to pay costs like national insurance. It also claims it it isn't a transportation service provider, and therefore isn't liable to pay VAT”. But English law, which works on precedent, may be catching up.

Barrister Jolyon Maugham has acted following Uber losing an employment tribunal ruling last year. “The tribunal ruled that Uber's UK workers were entitled to minimum wage, among other benefits … It also held that Uber was a transportation service, saying: ‘It is unreal to deny Uber is in a business as a supplier of transportation services.’ And if Uber is a transportation service, then it's liable for VAT”. At 16.67%. And it gets worse.

Jolyon Maugham

“Maugham has just sent a letter before action to Uber, which is a precursor to formally recovering a debt through legal means … The debt, in this case, is a VAT receipt for one of Maugham's Uber journeys … If Uber is ‘compelled’ to provide a VAT receipt, it is then liable to pay VAT to the UK's tax authority HMRC … Maugham calculated that Uber owes at least £20 million in unpaid tax, and said he'll take Uber to the UK High Court in April”.

But, as I pointed out recently, Uber’s losses accelerated last year: it would be interesting to know how much their finance is costing them, the cost of all those legal actions across the world, and all the PR employed to, shall we say, oil the wheels of media outlets. Uber recently lost its appeal against TfL’s requirement that drivers should possess a reasonable command of English. And previously supportive media players have gone quiet.

Maugham’s action did not make City AM, which has been part of the Uber cheerleader fraternity in the past, and nor did it interest the perpetually thirsty Paul Staines and his rabble at the Guido Fawkes blog. Nor has it made the increasingly piss-poor Evening Standard. Perhaps they all hope the action will fizzle out and go away.

Because if it succeeds, Uber is in for a Europe-wide caning: VAT will be reclaimed from them across the EU. It was so much easier when transportation robber barons like Cornelius Vanderbilt could buy off lawmakers. Playing by the rules - that can be tricky.

[You can contribute to crowdfunding Jolyon Maugham's action HERE]