Uber was last night accused of exploiting a loophole to avoid paying millions in tax that helps it undercut rivals.
It was claimed that HMRC has missed out on about £40million in VAT from the controversial taxi app thanks to the legal but highly controversial tactic.
Ride-hailing apps are meant to pay 20 per cent VAT on booking fees they collect from drivers on each fare. But Uber avoids this by treating its 40,000 UK drivers as separate businesses, as most earn less than the £85,000 a year threshold for VAT registration.
This enables the American firm to offer cheaper fares than both traditional taxi firms and rival app-based services, while depriving the Treasury of millions of pounds in tax.
Forgive me because I don’t understand this claim. The booking service is offered by Uber. Why would it make a difference if each of the drivers was VAT registered or not? It’s still Uber offering the booking service, no?
Uber collects an estimated £200million a year in fares, meaning HMRC could be losing out on at least £40million a year in VAT, according to calculations by Reuters.
Ah, so the claim is that the total fee should be Vatable. Which it isn’t, is it? This is Tom Bergin again. Which does actually explain:
Uber avoids having to charge British value added tax on its booking fees by treating each driver as an individual business and then billing drivers across EU borders from its Dutch subsidiary, using an EU VAT provision called the “reverse charge”.
The rule lets businesses sell goods or services to other businesses across EU borders without paying VAT. There is usually no loss of tax revenue, because the importing business collects VAT from its own customers.
But since Uber drivers mostly generate less than the 85,000 pounds a year sales threshold to register for VAT in Britain, they don’t have to collect it.
Gett and mytaxi both bill their drivers from companies within Britain. As the reverse charge does not apply to domestic sales, that means that unlike Uber they must charge drivers VAT.
It is upon just the Uber fee, not the total amount. OK, great.
So Tom, who is it who is not paying this VAT? It’s not Uber, is it? It the driers who aren’t paying it.
But then Bergin likes Dame Margaret, Lady Hodge, and has even been known to speak of Lord Snippa Spud approvingly. So tax incidence isn’t going to be one of those things he gets right, is it?