UBER’S CLAIM that its drivers should pay VAT for the service it provides instead of the app itself is about to be tested in the High Court in London.
Director of the GoodLaw Project (GLP) Jolyon Maugham QC took an Uber journey on March 20, costing £9.86, and then asked Uber to provide a VAT receipt for the trip. Uber refused and Mr Maugham is now about to issue proceedings against the American tech disrupter which could cost it hundreds of millions of pounds, both in the UK and potentially around the world.
WHAT IS THE GOODLAW PROJECT? – The GoodLaw Project was started in January of this year by Mr Maugham QC, with the aid of 100 barristers, and aims to hold the Government of the day to account through legal challenges through the courts.
It is also currently seeking a clarification on whether or not the UK can change its mind and not leave the European Union now that Article 50 has been triggered. And more importantly, with regards to the UK cab trade, the Good Law Project is alleging that Uber is avoiding paying Value Added Tax (VAT) and in fact owes the British Government many millions of pounds.
WHY IS THE GOODLAW PROJECT CHALLENGING UBER? – GLP founder Jolyon Maugham QC said: “We think that Uber is undercharging VAT on the cab services it offers. And we don’t have confidence that the taxman will collect that avoided tax. So, we plan to sue Uber ourselves.”
Mr Maugham added:
Also, we need to understand whether Her Majesty’s Revenue & Customs (HMRC) is treating these big US multi-nationals, including Uber, with kid gloves. We have no particular axe to grind with Uber. Its technology creates benefits for its drivers and passengers, but it must, like everyone else who wants to do business in the UK, comply with the laws.
WHAT IS THE GOODLAW PROJECT’S LEGAL CASE? – Every citizen in the UK has a statutory legal duty to ask for a VAT receipt as proof that a supplier of goods or services is paying a certain amount – 20 per cent – to the British government.
Uber claims that its drivers are self-employed and that any VAT owed for a cab journey supplied should be paid by them.
But, last year, a Central London Employment Tribunal ruled that Uber’s drivers should be defined as ‘workers’ and thus have rights to the minimum wage, holiday pay and sick pay.
And, says Maugham, “Because the drivers are now deemed to be working for Uber, the consequences of the tribunal’s decision is that it must be Uber supplying the transportation service – and thus liable for the 20 per cent VAT charge – and not its workers.”
WHAT HAPPENS NOW? – Uber is currently appealing against the Employment Tribunal ruling that its drivers should be defined as workers, but Maugham is not worried, as he says there are other reasons to claim that the US app company is providing a service.
Professor of tax law at Leeds University Rita de la Feria agrees and said:
There is an added value to what Uber is doing when it connects its drivers to passengers. So, Uber is definitely providing a service, otherwise it wouldn’t exist.
And if Uber loses the case brought by the GoodLaw Project, it won’t just be liable for the 20 per cent VAT owed in the UK, which could, if backdated to its launch in Britain in 2013, cost it hundreds of millions of pounds, it could potentially owe millions in unpaid tax across the globe.
National courts around the world are starting to look for precedence in courts outside of their own countries and when laws are similar, such as with VAT, many other countries will be looking at the UK’s decision on whether or not to pursue a case before their own courts.