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VAT legal challenge against Uber announced

Uber has been threatened with UK court action over its approach to paying value-added tax (VAT) in the UK.21 Mar 2017

The Good Law Project, a pro-bono initiative that describes itself as using "strategic legal cases both to change how the law works and to drive demand for further law change", has delivered a 'letter before action' to Uber as a precursor to legal proceedings, it told Gizmodo.

"We are suing Uber for a copy of a VAT receipt on a journey our director, Jo Maugham QC, took to a client’s last week. The VAT on the journey is a matter of a couple of pounds. But the consequences for Uber of it being liable for VAT are enormous: it will have to raise its prices by up to 20% - and will have a historical VAT liability of tens if not hundreds of millions of pounds in the UK and across Europe," the project told Gizmodo.

"We think the public isn’t confident HMRC is behaving fairly, we believe this perception is damaging to trust in the 'establishment,' we know the government isn’t interested in addressing this state of affairs, and we’re not going to stand by," it said.

The project is running a crowdfunding campaign to fund its case against Uber.

A spokesperson for Uber said: "Drivers who use the Uber app are subject to the same VAT laws as any other transportation provider in the UK."

Tax expert Darren Mellor-Clark of Pinsent Masons, the law firm behind Out-Law.com, said: "This development is another example of the pendulum effect frequently seen in business- and transaction-based taxes. New products and services emerge to challenge the status quo, and to some extent the law, including tax, is frequently left scrambling to catch up."

"Whether the current VAT treatment for Uber is the result of specific agreement between Uber and HMRC is unknown. However, this is far from the only instance of emerging technology and changing business practices causing VAT controversy. Across the spectrum, from the provision of financial services via technology, through Airbnb’s platform for rentals and to the supply of personnel for support services, uncertainty as to the correct VAT treatment emerges," he said.

"It does seem clear that, in many circumstances, tax authorities are keen to bring the correct amount of tax to account, as shown in the various challenges to Airbnb and the measures for online market places such as eBay. It seems that Maugham is keen to provide the catalyst for such change as regards Uber," Mellor-Clark said.

Airbnb said in February that it paid €7.3 million in tourist tax to 19 French municipalities in 2016.

Airbnb was the first platform to automatically collect and remit tourist taxes to city authorities on behalf of hosts. The platform reached an agreement with French authorities on the collection of taxes in August 2015 after the French government published a decree demanding that internet platforms take on this role. Previously, home-sharing hosts were expected to collect the tax and send this to the authorities themselves.