Uber settles VAT claim with HMRC and posts better than expected results
Uber is handing £615m to UK tax authorities to settle an investigation into unpaid VAT, as it reported better than expected results, sending its shares higher.
The San Francisco-based ride hire and food delivery company said it achieved a UK tax settlement on Monday to resolve all outstanding VAT claims and would pay £615m to HM Revenue and Customs during the fourth quarter.
Uber had previously argued it was exempt from paying VAT because its drivers were classified as self-employed. Following landmark court rulings that its drivers were workers with rights, it started adding 20% VAT in March.
Jo Maugham, director of Good Law Project, which brought a court case against Uber in 2017 for failing to pay taxes, tweeted about the tax settlement: “Quite a lot – but still rather less than I had understood HMRC was asking for … I wonder whether Uber had already made payments on account?”
An HMRC spokesperson declined to comment on this, but said: “HMRC has concluded a tax dispute with Uber concerning VAT due in the UK. This is a good result for the UK taxpayer and one that we would have reasonably expected to achieve in the court, fully in line with our litigation and settlement strategy.
“HMRC never compromises on its view of the law in order to secure a tax agreement. We will not settle for any amount less than we would reasonably expect to obtain from going to court.”
The news came as Uber reported a 26% rise in gross bookings year on year, to $29bn (£25.4bn) in the quarter from July to September. Revenues beat forecasts with a 72% leap to $8.3bn after Covid lockdowns eased, leading to booming travel.
The Uber share price jumped nearly 16% to $30.80 when Wall Street opened, valuing the company at $61bn.
Dara Khosrowshahi, the chief executive, said: “Even as the macroeconomic environment remains uncertain, Uber’s core business is stronger than ever.”
The mobility division grew faster than the food delivery arm. Trips during the quarter grew 19% year on year to 1.95bn, or about 21m trips a day on average.
Uber made a net loss of $1.2bn, mainly because of revaluations of its equity investments in other ride-hailing companies. But profits increased to $516m from $508m on an adjusted Ebitda basis (earnings before interest, tax, depreciation and amortisation).
It cheered investors by forecasting adjusted Ebitda of $600m to $630m in the final quarter of 2022, above Wall Street forecasts, as well as revenues of $30bn to $31bn.
Uber also reported positive free cash flow, easing worries that it might run out of cash. It recorded free cash flow of $358m, on top of $382m in the second quarter.
In July, the Uber files, a cache of documents leaked to the Guardian, exposed how the company had flouted laws, duped police, exploited violence against drivers and secretly lobbied governments during its aggressive global expansion.
Uber is now seeking to remodel itself. Freight is a growing area, and it has recently launched a new advertising division to capture users at every stage, from booking on the app to the car ride. The ads could generate $1bn a year from 2024.