TAXING MATTERS VAT’S NOT ENTERTAINMENT
ALL CHANGE, IT’S VAT TIME OF YEAR AGAIN….
Article by Gary Jacobs, Managing Director of Eazitax: the industry’s leading accountancy firm for sole trader tax returns and company accounts
eazitax.co.uk 020 8529 2600
VAT seems to be on everyone’s lips at the moment, not just in my office. This is the political season for U-turns, so as I write this blog, in which I was going to go into more detail about the VAT on fares issues, I have received the first bit of information regarding Uber’s VAT settlement. So, I am going to take a broader look at what is going on, and what I think may happen in the future.
VAT is on everyone’s radar again, as is TfL’s need for clarity on operator contracts and the obligations relating to the Uber v TfL v App Drivers Union etc. Currently the shadow of the Sefton v TfL case looms. As I have mentioned many times, this is all fluid and yet to be decided. I will explain more later.
VAT SETTLEMENT
Uber is paying HMRC £615m to settle all outstanding VAT claims, but the sum is much lower than the £1.5bn the tax authority had reportedly raised in VAT assessments.
Uber confirmed recently that it had resolved the HMRC VAT claims, and that it was paying HMRC the sum during its fourth quarter to resolve the outstanding VAT claims. The announcement came as it announced that globally gross bookings had grown 26 per cent to $29.1bn and revenue had increased by 72 per cent to $8.3bn.
This issue is not new and has been in dispute for some years now, and even though the tech ride- hailing app seems to be a magnet for controversy, this is an age-old fight that we have had with HMRC on the movement of money through operators’ books.
HMRC wanted Uber to charge the standard rate of 16
VAT for gross bookings, not on the admin fee (what we would call circuit rent or commission) that the company charges drivers.
Previously Uber accounted for VAT with the driver providing the service to the customer, rather than as a principal transport provider, which is roughly the principal and agent position for VAT that everyone is talking about now.
Uber previously claimed that it should only pay VAT on the commission it receives from the driver, as the company had seen its role as the agent, which left the VAT burden on the fares shifted to its drivers. However, most drivers were earning below the £85,000 VAT registration threshold, and were therefore not obligated to charge VAT.
There are two things to take from this; firstly, it was made clear by Jolyon Maugham, who began the process, that the figure Uber paid was considerably “Less than HMRC was asking for”, also “there are some very serious unanswered questions about why HMRC appears to have settled the dispute with Uber for such a low sum,” (it was originally thought to be £1.5bn.
Secondly, the existing case was turned on its head when, following the High Court ruling against Uber in December 2021, wherein it was ruled that they were the principal service provider (not the driver), HMRC pushed for retrospective VAT payments. Although I still dispute the validity of the ruling to
DECEMBER 2022 PHTM
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