A leading tax lawyer is planning to challenge Uber in the courts over what he alleges could be a £20m-a-year black hole in its tax payments in the UK.
Jolyon Maugham QC said he was preparing to submit a case to the high court that would argue the US taxi app company should be paying VAT on fares, which he estimated would total almost £20m for 2015.
He said he was concerned that HM Revenue and Customs was treating big US companies more favourably than governments in continental Europe do. “That narrative that HMRC doesn’t really want to discuss is incredibly damaging to people’s perceptions of the fairness of the society they live in,” Maugham told the Guardian.
Uber, which describes itself as a platform that connects riders and drivers, insists it is not providing a transportation service and so it does not pay VAT. If drivers earn above the VAT threshold then the tax is their responsibility, Uber says.
“Drivers who use the Uber app are subject to the same VAT laws as any other transportation provider in the UK,” said Jo Bertram, the general manager of Uber in the UK.
Maugham counters that “the taxable supply is being made by Uber”. He said this was supported by an employment tribunal that last year found Uber drivers were employed by Uber rather than self-employed as Uber continues to claim.
“I think I have found a way to force HMRC’s hand to disclose whether it is collecting the VAT that seems to me to be due from Uber,” Maugham said. “I want to force government and Uber to engage with these issues which I think are destructive of the fabric of society.”
If Uber was forced to pay VAT on fares it could cause fares to rise or driver earnings to fall, which would mean that if Maugham was successful, Uber’s business model in the UK could be impacted.
“It seems as though Uber racked up about £115m in fares last calendar year,” he wrote in a blogpost. “This would mean it had a VAT liability of just under £20m for London for that year. But HMRC can go back four years or, sometimes, more. There is no suggestion in the accounts of the relevant Uber entity – Uber London Limited – that it was aware it had this risk.”
Uber has 40,000 drivers operating on its platform in the UK.
In the US, the company’s chief executive, Travis Kalanick, has called in the former attorney general Eric Holder to investigate allegations by the software engineer Susan Fowler of sexual harassment and discrimination at its San Fransisco head office. She claimed her manager propositioned her for sex on her first day in his team and that a director explained the dwindling numbers of women in her organisation by saying “the women of Uber just needed to step up and be better engineers”.
In an email to staff on Monday Kalanick said: “The company is hurting.” He revealed that 85% of employees in engineering, product management and scientist roles were men – slightly more than at Facebook and Google, and the same as Twitter.
He said: “What is driving me through all this is a determination that we take what’s happened as an opportunity to heal wounds of the past and set a new standard for justice in the workplace. It is my number one priority that we come through this a better organisation, where we live our values and fight for and support those who experience injustice.”
In the UK it is also wrestling with an employment tribunal ruling that some drivers should be considered workers rather than self-employed and therefore should be paid at least the minimum wage of £7.20 a hour. It is planning to appeal the judgment.
“At the moment we are working internally to work out what a world would look like with worker status,” said Andrew Byrne, the head of public policy at Uber UK and Ireland. “The ability to work exactly when, how and where you want would probably be compromised.”
He said the single biggest change would be paying the minimum wage. “It could also have an impact on fares,” said Byrne. “I would doubt they would decrease.”
Bertram said: “The reason why we’re appealing the tribunal’s preliminary decision is because the vast majority of drivers tell us they want to remain self-employed.”