HMRC (UK Tax Authority) Persuing Uber for £386M (~$487M) Vat

I’ve had to speak to HMRC quite a lot in the past couple years regarding VAT and PAYE issues and I almost always get through to a knowledgable and helpful person.

The waiting time on hold seems to have gone up since covid though. The last few times I’ve called the wait has been between 30 minutes and an hour when before covid the wait was normally less than five minutes.

I did once speak to someone that was quite hostile and unhelpful but after I finished the call I immediately called back and the person who picked up the phone was much more helpful.

However whenever I’ve had to call for personal matters it’s been a bit more hit and miss.

Last time I had to contact HMRC involved a 5 hour wait in the call queue. However, the person who eventually answered was extremely helpful and understanding. Even gave a personal email address in case I needed to follow up.

The last time I needed to contact them I wrote a letter. I got a reply about a year later but the issue was resolved.

The court found they were "workers" rather than employees. It's a sort of half-way status in English employment law for people who are neither employees nor self-employed. It provides some, but not all, of the rights of employment. Most relevant here, it guarantees minimum wage.

I think that's exactly the issue. HMRC objects to them using the rules aimed at tour operators.

Assuming they continue to earn net incomes like the most recent quarter. Which they just did for the first time ever.

The concern of tax rules being unclear and causing confusion and distress is a real concern, but that's off topic.

Uber willfully misunderstood tax law to their advantage. Were most other taxi companies charging VAT as tour operator even before Uber started? If so, you would be right that this a concern of unclear rules and arbitrary application of them...

But that's not the case

https://www.accountingweb.co.uk/any-answers/should-taxi-firm...

> Given government spending is out of control

UK spending is barely above average for industrialised countries. After a decade of austerity, British people are getting poorer and poorer.

> This type of thing happens all the time. In the UK you can work as an independent contractor for years then one day HMRC will randomly decide to make a case that you're were actually an employee the whole time and should have been paying a significantly higher rate of tax.

I assume you're referring to the IR35 laws - which were brought in specifically to combat a form of tax avoidance by highly paid contractors on long-term projects, who functioned exactly like employees (by being a contractor instead of an employee you could save a whole bunch of tax in the UK).

Yes, IR35 is a complicated pain - but everyone and their dog in the UK tech scene knows that contracting is/was the way to pay less tax. So it makes sense that HMRC is attempting to close the loophole.

> Uber paid their taxes as they understood UK tax law.

They were specifically attempting to use a loophole to avoid paying VAT the standard way (by claiming they're a "Tour Operator"). They've already lost multiple cases around the world for doing similar bad-faith interpretations of laws - so I think in this case it's Uber doing the exploiting.

I think the idea that HMRC (who have a limited enforcement budget and were pressured into taking this action by outside campaigners) is the one exploiting the tax system and corporations that spend vast sums of money coming up with creative reinterpretations of terms to dramatically increase their post tax profitability are merely bemused by its complexity is an odd take. Particularly when the company in question is notorious for creative reinterpretation of or plain ignoring regulations inconvenient to it.

VAT isn't a particularly complicated tax. This dispute relates to the fact Uber tried and failed to convince UK courts that its drivers were self employed under UK law so it lost its grounds for only owing VAT on commissions. (afaik they hadn't provided any mechanism to pay VAT invoices to the minority of drivers with self-employment earnings over the VAT threshold, so it's difficult to argue they were doing their level best to comply with VAT law under the "self employed contractor" model anyway)

IR35, which you are referring to, is an absolute fucking nightmare for independent consultants. And lately “Managed Services Company” legislation seems to be their new attack vector.

However VAT is generally pretty clear, and we know Uber skirt every law and tax liability they possibly can. Looks like it’s time to pay the piper…

Debit: liability account on balance sheet

Credit: cost of sales

Or you could just account for VAT properly in the first place like 99% of businesses manage to.

They can probably keep the amount as asset on the balance sheet until court decision (at which point liability will be created if they lose). Instead of having it in the "cash in bank" account it moves to "cash at HMRC" account, or something like that.