Does Uber owe the taxman hundreds of millions in VAT?

UBER is facing a court battle over claims it has failed to pay what could be hundreds of millions of pounds in VAT.

The taxi app does not charge passengers the levy because it claims it is a technology firm rather than a transport provider.

But now it is being taken to the High Court by campaigners who argue it is wrongly depriving the taxman of tens of millions of pounds a year. The case brings further questions about the cosy relationship between the Government and Uber – and why the HMRC has left it to a private individual to bring the court action rather than go after the firm itself.

Companies providing transport services are supposed to charge VAT at the standard rate of 20 per cent on journeys. But Uber says it does not need to do this because it links passengers with drivers on its app rather than provide the transport itself.

As most of the individual drivers earn below the annual VAT threshold of £83,000, little if any VAT is collected on fares.

Tax barrister Jo Maugham, who is bringing the case against Uber, said the firm’s argument that it was not a transport provider was contradicted by an employment tribunal last year, which found its drivers should be classified as workers.

The test case in November said the firm’s drivers were entitled to the national minimum wage and employment benefits such as holiday pay. Uber’s 40,000 drivers who work across 20 British cities took more than £115 million in fares in 2015, according to accounts filed with Companies House. If it had charged VAT at 20 per cent on top of the fares, it would have raised £23 million for the taxman.

Some analysts believe its takings in the UK could actually be closer to £ 1billion but are obscured because of the complicated nature of its multi-national accounts structure. Mr Maugham has sent a will letterfile papers before with action the to High Uber Courtand in mid-April once he has crowdfunded the costs of his legal challenge. He said: ‘Uber, like everyone else, must pay the right amount of tax. Last year the employment tribunal held that Uber was supplying transportation services. If Uber is supplying transportation services, it should be charging 20 per cent VAT on all its fares and paying that money over to HMRC – tens or hundreds of millions of pounds every year. But it wasn’t last year and it isn’t now.

‘If Uber is liable for VAT it will also owe substantial amounts of unpaid VAT from the past – both to HMRC and to other tax authorities throughout the EU.’

Mr Maugham said the fact he was having to bring the case himself using money raised from the public, rather than HMRC taking action, raised questions about the Government’s links with Uber.

He said: ‘People are sceptical – and with some justification – that HMRC applies the same rules to the big boys as it does to you and me. This scepticism is hugely damaging to public confidence… but the Government shows no signs of wanting to address it.

‘Indeed, our law and practice is tending towards less rather than more public scrutiny of private deals between the taxman and the rich and powerful.’

An HMRC spokesman said: ‘We don’t discuss identifiable taxpayers. everyone has to pay the tax due under the law and we make sure they do.’ An Uber spokesman said: ‘Drivers who use the Uber app are subject to the same VAT laws as any other transportation provider in the UK.’

The Mail revealed at the weekend how Downing Street put pressure on then London Mayor Boris Johnson not to introduce tough regulations on Uber while David Cameron was PM.

Uber is to shut down its operation in Denmark next month because new laws require taxi drivers to have fare meters and seat sensors. The firm has around 2,000 Danish drivers.