VAT, UBER, AND THE “GIG ECONOMY” - FURTHER DEVELOPMENTS
Released On 5th Jan 2024
I commented in August - Uber and VAT-what’s it all about? - about whether Uber will end up having to account for VAT on all of its private hire income, or just on the amount it retains after paying the self-employed driver. The Courts have determined that when a passenger books a journey via a ride hailing App, it is contracting with the App owner, e.g. Uber, Bolt or Veezu, rather than the individual driver.
One of Uber’s competitors- Bolt- has just won a case on its own mobile ride-hailing services. It successfully argued that it can use the Tour Operator’s Margin Scheme (“TOMS”) meaning it just accounts for VAT on the profit margin as calculated under the scheme.
HMRC, of course, want VAT from Uber/Bolt on the fulling selling price, bearing in mind that few drivers will be VAT registered in their own right. I understand that an Appeal in Uber’s own case is due to be heard in early 2024.
The use of TOMS to reduce the VAT payable is also contested by HMRC in the short stay lettings market. In August’s post I mentioned a case called Sonder, which rented 40 individual apartments from third party landlords. The landlords charged Sonder an annual fixed rent which was treated as VAT exempt so HMRC only ended up with VAT on Sonder’s profit rather than the full selling price of the accommodation.
Sonder won its case before the First Tier Tribunal, but HMRC’s appeal against that judgement is likely to be heard in December 2024.
So where does this leave affected businesses that buy in and resupply accommodation or drivers?
It is probable that HMRC will contest the lead cases above through the Courts. If they lose, it is then possible that HMRC will seek to change the law, for example, denying the use of TOMS for ride hailing services unless the independent drivers are themselves VAT registered.
It may be some years before the dust finally settles. However, those businesses that have accounted for VAT on the full value of ride hailing services, in either case having paid self-employed drivers to undertake the journey, should consider whether to submit a protective claim for VAT overpaid. Retrospective claims are generally capped at four years.
Likewise, protective claims could be prudent for accommodation providers who have paid rent to a third party for a property that has then been used for short stay lettings to corporate and leisure travellers, and who have accounted for on the full letting value.
