A2Z LICENSING OPINION ON UBER U-TURN: AN ALTERNATIVE PERSPECTIVE
Uber, having asked the High Court to declare that operators were not principals, has now made a U-turn and made a second application to the High Court asking it to declare that operators are principals!
In United Trade Action Group Ltd (UTAG) & Uber London Ltd v Transport for London (TFL) [2021] EWHC 3290 (Admin), Uber asked the High Court to declare that a London operator (an operator licensed under the Private Hire Vehicles (London) Act 1998) was not required to contract with a passenger as principal, meaning London operators could effect contracts with customers on behalf of drivers as their agent.
The High Court, constituted as a Divisional Court (meaning it consists of at least two judges), handed down its judgment in the London case on 6 December 2021.
The Divisional Court granted a declaration that: “in order to operate lawfully under the Private Hire Vehicles (London) Act 1998 a licensed [London] operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking”.
On 1 April 2022, making its U-turn, Uber lodged its second application with the High Court, this time against Sefton Metropolitan Borough Council, asking the court to declare that: “in order to operate lawfully under Part II Local Government (Miscellaneous Provisions) Act 1976, a licensed operator [outside of London] who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking”.
So, what’s the operator principal principle; why does it matter; and why might Uber have decided to make a U-turn on this issue?
To start to grapple with these issues, it’s necessary to have a basic understanding of the difference between agent and principal. A principal is someone who either contracts directly with a customer on their own account or indirectly via an agent. An agent is someone who acts on behalf of a principal to create contractual relations between the principal and a customer.
In the taxi and private hire world, private hire operators 84
often act as agent for drivers who are principals in connection with cash work and as a principal in connec- tion with account work, such as local authority transport contracts for which the operator had to tender for the work and invoices the local authority.
Whether a driver pays to an operator a commission on the fares they earn or a weekly fee of whatever name (rent, office rent, radio rent, settle, subscription, etc) or a combi- nation of the two, the driver is paying for the operator’s services as their agent.
HMRC has long accepted that an operator may act as agent in relation to cash work and as principal for account work – see HMRC VAT Notice 700/25.
Having lost the London case, if indeed Uber ever genuinely wanted to win it, Uber, like all other London operators, now has to accept every booking as principal. As the fare is now payable to Uber as principal, VAT is now charged by Uber on each fare at 20%.
Before the London court case, a £10 Uber fare would be charged to the customer as £10 and the driver would see that they had been paid £10 and that Uber had then deducted its 25% commission of £2.50, meaning the driver received the net sum £7.50.
Now that the fare is payable to Uber as principal, the £10 fare has become a £12 fare to the customer (£10 plus VAT). Uber now accounts to HMRC for the £2 VAT and it keeps £2.50 for its services (as it did before in respect of commission), paying the balance of £7.50 to the driver. But unlike before the London court case, the driver is now only told that they are being paid £7.50 for the journey, because the fare charged to the customer is now payable to Uber and the £7.50 is the fare the driver agreed to accept for it from Uber.
So, does this really matter? As a driver, you might think not, as in the above example you still earn the same £7.50 and does it really matter whether you are the principal and pay the operator as your agent or whether they are the principal and pay you for the services you provide as a driver to their customer?
However, how many people that use taxis and PHVs, many of them out of necessity, can afford to pay an extra 20% on every taxi fare? If customers cannot afford to pay the
JUNE 2022
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90
