Your cheap Uber ride might cost 20% more if the company loses a legal battle over taxes in the UK.
Jolyon Maugham QC is a respected barrister who is suing Uber through his non-profit, the Good Law Project, for alleged unpaid VAT.
In a case update, the Good Law Project estimated that Uber will have to charge passengers more, cut drivers' fees, or reduce its own cut of fares if the company loses the case.
In a press statement, the Good Law Project said: "The consequences for Uber's business model are profound. Going forward, it may have to raise its prices by as much as 20%, reduce the wages it pays to drivers, or charge a smaller fee.
"It will also be forced to hand over a percentage of all UK fare income for the last four years to HMRC. Because VAT is an EU tax, Uber's businesses in other countries will also be affected."
The thinking is that Uber can currently afford to undercut rivals and give you cheaper fares because it doesn't pay as much tax as it should. And since it claims drivers are all self-employed, it doesn't need to pay costs like national insurance. It also claims it it isn't a transportation service provider, and therefore isn't liable to pay VAT.
That might all change.
Maugham has just sent a letter before action to Uber, which is a precursor to formally recovering a debt through legal means.
The debt, in this case, is a VAT receipt for one of Maugham's Uber journeys.
If Uber is "compelled" to provide a VAT receipt, it is then liable to pay VAT to the UK's tax authority HMRC.
Maugham's argument hinges on Uber losing an employment tribunal in the UK last year. The tribunal ruled that Uber's UK workers were entitled to minimum wage, among other benefits. It also held that Uber was a transportation service, saying: "It is unreal to deny Uber is in a business as a supplier of transportation services." And if Uber is a transportation service, then it's liable for VAT.
Maugham calculated that Uber owes at least £20 million in unpaid tax, and said he'll take Uber to the UK High Court in April.
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."
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