Uber customers risk fare rises amid VAT review

UBER customers face the prospect of price rises after tax authorities launched a review of the taxi app.

HMRC is investigating whether Uber is underpaying VAT, raising the prospect of additional charges that would ultimately be passed on to passengers.

Uber said in US stock market filings that HMRC was “reviewing our VAT filings” as part of ongoing discussions between the app and the authority.

The business started charging VAT on rides last year as part of changes forced on it after a High Court defeat. However, it only collects the tax on the commission it takes from drivers, 25pc of the fare, rather than the whole booking. HMRC is reviewing whether this complies with legislation.

If Uber applied VAT on the whole booking, this could add more than 10pc to the cost consumers pay for a ride.

Uber said: “Due to the complexity and uncertainty of these matters and the judicial processes, any reasonably possible loss or range of loss cannot be estimated.”

Uber historically charged no VAT on rides in the UK, saying that drivers, not the company, were the ones contracting with passengers. The arrangement was declared illegal in London by the High Court in December 2021 and Uber changed its business model across the UK last March as a result.

The company paid £613m towards the end of last year to settle an investigation related to it previously not charging VAT. Rivals such as Bolt and Freenow have made similar business model changes.

Uber is now registering all sales and profits derived from its UK business, ending an arrangement in which it moved revenues abroad and minimised corporation tax payments.

Uber is thus likely to pay a substantial corporation tax bill for the first time on its 2022 revenue.