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According to news reports, Uber has handed over £615m to UK authorities in unpaid VAT. Uber had previously argued it was exempt from paying VAT because its drivers were classified as self-employed. 

The UK Supreme Court disagreed and ruled that Uber drivers are “workers” by legal definition, and thus entitled to minimum wage and holiday pay. Following the ruling, Uber began adding 20% VAT.

In the landmark case of Uber BV v Aslam, the court rules that:

 “If the reality is that Uber’s market share in London is such that its drivers are, in practical terms, unable to hold themselves out as available to any other PHV operator, then, as a matter of fact, [when they have the Uber app switched on] they are working at [Uber London’s] disposal as part of the pool of drivers it requires to be available within the territory at any one time.”

 [The Guardian]

Loophole Closed in UK VAT Laws

In the past, individual drivers entered into contracts directly with passengers. Since most drivers were below the UK VAT registration threshold of £85,000, most passengers travelled without paying any VAT.

In a recent article in The Guardian, Uber said it reached a settlement with HMRC to resolve all outstanding VAT claims and  “would pay £615m to HM Revenue and Customs during the fourth quarter.”

A spokesman for HMRC told journalists that the Uber VAT dispute has been resolved, with both sides pleased with the settlement. 

From VAT Compliance Challenges to Growth

Uber’s VAT settlement in the UK comes at a good time for the company. With Covid lockdowns in the rearview mirror, Uber’s revenues grew by 72% in the third quarter of fiscal 2022. Dara Khosrowshahi, Uber CEO, told investors that consumers are spending more on services, which is having a positive effect on Uber’s bottom line.

VAT Compliance is Essential for Success

The moral of this £615m Uber story? VAT compliance is an essential ingredient for a successful global business.

Over 170 countries have a value-added tax (VAT), yet research shows that the global market potential for VAT reclaim is $74.9 billion – of which over 54% is left unclaimed by businesses.

Blue dot VATBox helps companies to successfully reclaim VAT while maintaining a high level of compliance. Our VAT reclaim and compliance solution enables companies to:

• Gain insights into gap trends and learn where to focus compliance efforts based on previous conflicts
• Ensure the highest compliance rate by using our triple QA mechanism to extract, match and analyse every invoice
• Leverage powerful analytics and actionable insights that support informed data-driven decisions while ensuring full compliance with tax and financial authorities

Powered By Best-in-Class Analytics

VATBox is powered by best-in-class analytics, which enables financial professionals to gain insights based on past trends of submitted VAT refund requests vs actual refunded VAT. You can then benchmark your company against your industry average number of disqualified VAT reclaim requests. Reduce risks and improve compliance with VATBox.

Blue dot has processed over $60 billion in spending and managed 2.4 billion transactions, and 38.6 billion tax controls. Is your company facing the challenges of VAT reclaim and compliance? We would love to hear from you.