Business

Uber Faces £1 Billion VAT Showdown with HMRC

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Uber, the ride-hailing and food-delivery giant, is gearing up for a significant tax dispute with HM Revenue & Customs (HMRC) over £1 billion in VAT payments.

Since March 2022, Uber has been required to pay 20 per cent VAT on its fares and delivery sales, resulting in a total charge of £951 million by HMRC. Uber, however, contends that VAT should be applied only to its profits, not its revenues.

In its recent accounts filed at Companies House, Uber disclosed that it had paid £631 million in VAT to HMRC in 2023, listing this as a debt it anticipates recovering. Additionally, the company paid £150 million in January and received a further £170 million bill more recently.

“The payments do not represent our acceptance of the assessments,” Uber stated in its UK annual report. “We believe that we will be successful in our appeal, upon which the full amount of our payments will be returned to us with interest.”

Historically, Uber did not charge VAT to customers, arguing it was merely an intermediary between customers and drivers, who would be VAT-exempt unless earning over £85,000 annually. This stance shifted after the Supreme Court ruled in 2021 that Uber’s drivers were “workers” rather than self-employed, leading to a £615 million settlement with HMRC over historic unpaid VAT and acceptance of future VAT liabilities.

Uber argues that the 20 per cent VAT should only apply to its profit on sales, invoking the Tour Operators’ Margin Scheme (TOMS). Last December, a tax tribunal supported rival Bolt’s claim to be eligible for TOMS, boosting Uber’s position. HMRC is appealing this ruling, and the Treasury is currently consulting on potential changes to VAT rules for private-hire vehicles.

Uber’s UK accounts reveal a profit of £29 million on £5.3 billion in revenues last year, with a corporation tax payment of £4.5 million. The company’s revenues increased by 56 per cent, partly due to a business restructuring in 2022.

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Uber Faces £1 Billion VAT Showdown with HMRC