Discussion
Uber model is demonstrably different to ebay by virtue of its relationship with drivers vs eBay's with sellers.
For this vat question, there is either simply no parallel (according to Maugham), or a perfect parallel (according to (uber). Maybe the court will decide if the case proceeds
No hidden agenda, merely updating a thread I started as the subject of the thread develops. These things take time to reach a conclusion.
For this vat question, there is either simply no parallel (according to Maugham), or a perfect parallel (according to (uber). Maybe the court will decide if the case proceeds
No hidden agenda, merely updating a thread I started as the subject of the thread develops. These things take time to reach a conclusion.
A bit more about the case in this article
https://www.taxjournal.com/articles/why-i-m-challe...
Maugham writes
Last month, under the auspices of the Good Law Project, I issued proceedings in the High Court against Uber London Ltd. The proceedings were for a declaration that Uber should, and an injunction that it must, issue a VAT receipt for a journey I took from my chambers to a professional client in the West End. The VAT on that journey – if VAT there is – is only £1.06. But the case raises questions of very real significance.
https://www.taxjournal.com/articles/why-i-m-challe...
Maugham writes
Last month, under the auspices of the Good Law Project, I issued proceedings in the High Court against Uber London Ltd. The proceedings were for a declaration that Uber should, and an injunction that it must, issue a VAT receipt for a journey I took from my chambers to a professional client in the West End. The VAT on that journey – if VAT there is – is only £1.06. But the case raises questions of very real significance.
Mrr T said:
If you want to be taken seriously when discussing tax you really should do some research. The structure does not reduce UK tax it reduces US tax. If you read the article you linked to it even refers to US not UK taxes.
The irony of the structure is that Uber does not make a profit anywhere in the world. So there is no need to shield profits.
Uber revenue may have risen in 2016 but it still lost $2.8bn.
The business model is to undercut the competition become the dominant supplier when it will then make money. The fact is it’s not working and does not look as if it will. It’s just a matter of how long the funding lasts till the doors close.
In the interim enjoy a great app and cab fares subsidised by Uber investors and creditors.
How would investors and creditors react to an enforced 20% increase in U.K. fares (and similar in other EU countries) if this case plays out as The Good Law projects hopes?The irony of the structure is that Uber does not make a profit anywhere in the world. So there is no need to shield profits.
Uber revenue may have risen in 2016 but it still lost $2.8bn.
The business model is to undercut the competition become the dominant supplier when it will then make money. The fact is it’s not working and does not look as if it will. It’s just a matter of how long the funding lasts till the doors close.
In the interim enjoy a great app and cab fares subsidised by Uber investors and creditors.
A Reuters article today with the suitably dramatic headline "Exclusive - Loophole allows Uber to avoid UK tax, undercut rivals"
http://uk.reuters.com/article/uk-uber-tax-britain-...
Draws a comparison between Uber, Gett & Mytaxi
And also suggests that Uber is doing nothing wrong
"Three European tax experts consulted by Reuters said Uber's practise probably complies with the way Britain has decided to implement EU rules."
And some ways in which other European countries set things up differently with respect to the VAT reverse charge mechanism
"Other EU countries often have lower sales thresholds to register for VAT, and several have systems in place to ensure that buyers that are not VAT-registered pay the missing tax when they import goods or services VAT-free across EU borders.
Germany has imposed a requirement on non-VAT registered businesses to complete a special form and pay the tax when they import reverse-charged goods or services, said Barbara Fleckenstein-Weiland, tax lawyer with Flick Gocke Schaumburg in Frankfurt. Erwin Boumans, Brussels-based tax partner at accountants BDO said Belgium had a similar system."
http://uk.reuters.com/article/uk-uber-tax-britain-...
Draws a comparison between Uber, Gett & Mytaxi
And also suggests that Uber is doing nothing wrong
"Three European tax experts consulted by Reuters said Uber's practise probably complies with the way Britain has decided to implement EU rules."
And some ways in which other European countries set things up differently with respect to the VAT reverse charge mechanism
"Other EU countries often have lower sales thresholds to register for VAT, and several have systems in place to ensure that buyers that are not VAT-registered pay the missing tax when they import goods or services VAT-free across EU borders.
Germany has imposed a requirement on non-VAT registered businesses to complete a special form and pay the tax when they import reverse-charged goods or services, said Barbara Fleckenstein-Weiland, tax lawyer with Flick Gocke Schaumburg in Frankfurt. Erwin Boumans, Brussels-based tax partner at accountants BDO said Belgium had a similar system."
Alpinestars said:
Sucking money out of the UK as you put it, is not illegal. Set up properly, most jurisdictions require the IP holder to charge for the IP, eg, if the IP was located in the UK, the UK tax rules would require it to charge for it's use. The question is whether the UK is charged too much. That's a transfer pricing question.
Operated correctly, the structure is set up to reduce U.S. taxes. Reduction of UK tax is a red herring, ie, a UK company would expect to pay for the use of IP in any event.
The part of the structure that reduces US taxes will, whatever the outcome of the VAT case, still work to reduce US taxes though won't it? Operated correctly, the structure is set up to reduce U.S. taxes. Reduction of UK tax is a red herring, ie, a UK company would expect to pay for the use of IP in any event.
AIUI that is achieved - in layman's terms - by accruing the profit outside the US jurisdiction and never repatriating it
The part of the structure through which Uber currently claims the right that fares generated through its system should not be subject to UK VAT is the part under threat from the case
An update posted by The Good Law Project includes links to
Letter to Uber's solicitors
Pleadings
Response Pack
Application for costs protection
Witness Statement
Exhibit to Witness statement
Here is a link to the full update, the Uber section is the second topic covered
http://mailchi.mp/goodlawproject/good-law-project-...
The particulars of the claim are
Letter to Uber's solicitors
Pleadings
Response Pack
Application for costs protection
Witness Statement
Exhibit to Witness statement
Here is a link to the full update, the Uber section is the second topic covered
http://mailchi.mp/goodlawproject/good-law-project-...
The particulars of the claim are
Edited by anonymous-user on Monday 26th June 11:06
Murph7355 said:
None of which changes my opinion of the bloke bringing the action.
He notes that the tax position etc isn't for the courts to decide but makes a whole paragraph or more in his case on it.
He's using the courts (I'd argue wasting court time) to serve his own agenda. The sole objective he has is around the tax situation. He should have passed his concerns to HMRC and let them deal with it. HMRC's relationship with Uber is no more his business than his own relationship with HMRC is Uber's. Changing that sets dodgy precedents no matter how he tries to dress it up.
I wouldn't argue particularly vigorously against all the points you make, other than to say the courts are more than capable of identifying and dealing with vexatious / frivolous litigationHe notes that the tax position etc isn't for the courts to decide but makes a whole paragraph or more in his case on it.
He's using the courts (I'd argue wasting court time) to serve his own agenda. The sole objective he has is around the tax situation. He should have passed his concerns to HMRC and let them deal with it. HMRC's relationship with Uber is no more his business than his own relationship with HMRC is Uber's. Changing that sets dodgy precedents no matter how he tries to dress it up.
I hadn't noted previously that the Uber entity that the action is being taken against is VAT registered
A quick glance at the last filed accounts for Uber London Ltd shows that there is indeed a fairly chunk VAT receivable (note 11) of £2.3m
So, AIUI (& I stand to be corrected here), Uber London derives revenue only from other Uber companies and practically all of that will be zero rated or through a reverse charge mechanism meaning that there is little or liability arising in the UK. It can (and does), however, rightly reclaim VAT arising from its costs.
A quick glance at the last filed accounts for Uber London Ltd shows that there is indeed a fairly chunk VAT receivable (note 11) of £2.3m
So, AIUI (& I stand to be corrected here), Uber London derives revenue only from other Uber companies and practically all of that will be zero rated or through a reverse charge mechanism meaning that there is little or liability arising in the UK. It can (and does), however, rightly reclaim VAT arising from its costs.
Murph7355 said:
At the expense of which other investigations the HMRC might have on its plate...? Why is it the GLP's role in life to try and drive the priorities? And on what basis are they doing so?
Surely HMRC's capacity for a handling a valid investigation, or any preference it might have for investigating one matter over another is of no concern to GLP, or even the High Court?If the judgment is that Uber should have been charging VAT on fares and HMRC has done nothing to enforce that, it would, surely, be a very serious failing by HMRC?
This action by GLP has been publicised sufficiently widely and for long enough now that there is no doubt at all that HMRC knows that it exists - I would say since March of this year at the very latest.
That being the case, someone at HMRC must have looked at the matter.
It might take the High Court case for Uber (and / or, but far less likely, HMRC) to make it public that HMRC is conducting some form of investigation (or has conducted, maybe even concluded, such an investigation).
If that happens, then the HC would, almost certainly, say that the GLP case must wait for the outcome of that investigation before it can be concluded.
HMRC is unlikely to say anything of course and I can't make my mind up at what point in the progress of this case Uber would play that card (if indeed it has that card) to best affect.
That being the case, someone at HMRC must have looked at the matter.
It might take the High Court case for Uber (and / or, but far less likely, HMRC) to make it public that HMRC is conducting some form of investigation (or has conducted, maybe even concluded, such an investigation).
If that happens, then the HC would, almost certainly, say that the GLP case must wait for the outcome of that investigation before it can be concluded.
HMRC is unlikely to say anything of course and I can't make my mind up at what point in the progress of this case Uber would play that card (if indeed it has that card) to best affect.
Uber's analysis of the nature of the relationship it has with users of Uber taxi rides has been rejected by i) a UK Employment Tribunal and ii) advocate general Szupnar of the ECJ
Neither of those opinions is binding yet: i) is subject to appeal and ii) awaits the verdict of the full court, but:
In i) the case was brought by Messers Aslam, Farrar and Others. I can see sufficient parallels between them (rather than HMRC / DWP / some other official agency) bringing that case and Maugham bringing this one for me to be comfortable that it is OK for him to attempt to use the High Court in this way
Similarly, in ii) the case was brought by an association of Barcelona taxi drivers. I can also see sufficient parallels between them (rather than a Spanish taxi regulator or some other official agency) bringing this case ... etc.
If the HC decides that the case has no merit and throws it out, so be it.
If the HC decides there is insufficient public interest to agree to the protection from costs that Maugham seeks, so be that too.
In the documents linked to earlier, the broader reasons behind GLP bringing the case are outlined (did you have the time yet to read them, particularly the witness statement?). The tone in which they are presented could (imo) influence a HCJ either way: to lean towards doing everything possible for the case to be heard in glorious detail with no financial risk to Maugham, or to immediately dismiss the whole thing as some sort of showboating that has no business being in court and to award costs in Uber's favour.
Neither would surprise me.
I don't buy the theory that some are considering that has HMRC / government choosing to allow large MNCs to operate here with scant regard to UK taxation & employment law. But I can see how the evidence that its supporters build that theory on could be seen to point that way.
Neither of those opinions is binding yet: i) is subject to appeal and ii) awaits the verdict of the full court, but:
In i) the case was brought by Messers Aslam, Farrar and Others. I can see sufficient parallels between them (rather than HMRC / DWP / some other official agency) bringing that case and Maugham bringing this one for me to be comfortable that it is OK for him to attempt to use the High Court in this way
Similarly, in ii) the case was brought by an association of Barcelona taxi drivers. I can also see sufficient parallels between them (rather than a Spanish taxi regulator or some other official agency) bringing this case ... etc.
If the HC decides that the case has no merit and throws it out, so be it.
If the HC decides there is insufficient public interest to agree to the protection from costs that Maugham seeks, so be that too.
In the documents linked to earlier, the broader reasons behind GLP bringing the case are outlined (did you have the time yet to read them, particularly the witness statement?). The tone in which they are presented could (imo) influence a HCJ either way: to lean towards doing everything possible for the case to be heard in glorious detail with no financial risk to Maugham, or to immediately dismiss the whole thing as some sort of showboating that has no business being in court and to award costs in Uber's favour.
Neither would surprise me.
I don't buy the theory that some are considering that has HMRC / government choosing to allow large MNCs to operate here with scant regard to UK taxation & employment law. But I can see how the evidence that its supporters build that theory on could be seen to point that way.
maffski said:
Just because a driver is a worker for the purposes of employment law it doesn't mean they are a worker for the purposes of tax law.
For example contractors caught by IR35 are workers for tax purposes but not for employment law.
100% correct and I am not saying it does.For example contractors caught by IR35 are workers for tax purposes but not for employment law.
I was using it as an example to show that a case that some might expect to be brought by "an Authority" could legitimately be brought by a concerned individual.
So, just as Messers Aslam, Farrar and Others legitimately brought the ET , Maugham can - I contest - legitimately bring the VAT case.
It doesn't have to be HMRC bringing the VAT case any more than it had to be an Authority bringing the ET.
The outcome of the ET has minimal bearing on the outcome of the VAT case, just as the VAT case (whichever way it goes) will have minimal bearing on any Appeal against the ET decision.
Remember that the case is crowd funded (including by many taxi drivers and some of their representative bodies) and, depending on the costs situation, might not even end up being fronted by Maugham anyway.
I do think there are many points at which this could unfold in opposite ways and that it does have the potential to set quite a few precedents that could be quite interesting
There is no doubt Maugham is looking for publicity, but I do think he sincerely believes the case is a valid one to bring in the way he has chosen from the options he describes in the documents linked earlier
I do think there are many points at which this could unfold in opposite ways and that it does have the potential to set quite a few precedents that could be quite interesting
There is no doubt Maugham is looking for publicity, but I do think he sincerely believes the case is a valid one to bring in the way he has chosen from the options he describes in the documents linked earlier
It is in the FT again today
https://www.ft.com/content/19c1afe8-5a8f-11e7-b553...
extract that summarises the case
1 side
The allegations in the case are small beer. Mr Maugham, a barrister at Devereux Chambers, argues that Uber was providing him with a service when he took a £6.34 ride from his office to meet a client, and is therefore obliged to provide him with a VAT receipt.
If Uber was deemed to be a service provider, it would theoretically have to collect VAT of 20 per cent of every fare and give it to HM Revenue & Customs.
and the other
Uber says it has no obligation to collect VAT or provide a receipt. It argues that it is only acting as an agent for self-employed drivers, rather than a service provider.
A spokesman for Uber said: “Drivers who use our app provide transportation services to passengers and will be registered for VAT if they meet the threshold set by government.” The VAT threshold is £85,000, an income most Uber drivers are unlikely to cross.
“This has been the case across the taxi and private hire industry for decades. Black cab drivers, and the apps they use, operate in exactly the same way. This claim is fundamentally flawed on a number of levels,” Uber added.
https://www.ft.com/content/19c1afe8-5a8f-11e7-b553...
extract that summarises the case
1 side
The allegations in the case are small beer. Mr Maugham, a barrister at Devereux Chambers, argues that Uber was providing him with a service when he took a £6.34 ride from his office to meet a client, and is therefore obliged to provide him with a VAT receipt.
If Uber was deemed to be a service provider, it would theoretically have to collect VAT of 20 per cent of every fare and give it to HM Revenue & Customs.
and the other
Uber says it has no obligation to collect VAT or provide a receipt. It argues that it is only acting as an agent for self-employed drivers, rather than a service provider.
A spokesman for Uber said: “Drivers who use our app provide transportation services to passengers and will be registered for VAT if they meet the threshold set by government.” The VAT threshold is £85,000, an income most Uber drivers are unlikely to cross.
“This has been the case across the taxi and private hire industry for decades. Black cab drivers, and the apps they use, operate in exactly the same way. This claim is fundamentally flawed on a number of levels,” Uber added.
A little twist in the winding road that is the Uber VAT journey
https://waitingfortax.com/2017/06/30/uber-a-new-fr...
Which is linked to this letter
https://jolyonmaugham.files.wordpress.com/2017/06/...
https://waitingfortax.com/2017/06/30/uber-a-new-fr...
Which is linked to this letter
https://jolyonmaugham.files.wordpress.com/2017/06/...
Not to do with VAT, but something that could be seen to further undermine Uber's claim to be acting only as Agent in the business model
https://arstechnica.com/tech-policy/2017/09/uber-d...
"Uber is fighting a proposed class-action lawsuit that says it secretly over charges riders and under pays drivers. In its defense, the ride-hailing service claims that nobody is being defrauded in its "upfront" rider fare pricing model.
...
The suit claims that, when a rider uses Uber's app to hail a ride, the fare the app immediately shows the passenger is based on a slower and longer route compared to the one displayed to the driver. The rider pays the higher fee, and the driver's commission is paid from the cheaper, faster route, according to the lawsuit."
For those minded to see the source document, I think this is it
https://arstechnica.com/wp-content/uploads/2017/04...
https://arstechnica.com/tech-policy/2017/09/uber-d...
"Uber is fighting a proposed class-action lawsuit that says it secretly over charges riders and under pays drivers. In its defense, the ride-hailing service claims that nobody is being defrauded in its "upfront" rider fare pricing model.
...
The suit claims that, when a rider uses Uber's app to hail a ride, the fare the app immediately shows the passenger is based on a slower and longer route compared to the one displayed to the driver. The rider pays the higher fee, and the driver's commission is paid from the cheaper, faster route, according to the lawsuit."
For those minded to see the source document, I think this is it
https://arstechnica.com/wp-content/uploads/2017/04...
An update on the good law project case
A little progress on Maugham's correspondence with HMRC about claiming the VAT back on an uber fare absent a VAT receipt
https://www.crowdjustice.com/case/uber/
Extract
In August, HMRC replied to Mr Maugham’s VAT Return asking for more information and he wrote back in the following terms:
"I write further to my letter of 30 June 2017 and your reply of 7 August 2017.
"In your reply you say you are presently unable to exercise your discretion under regulation 29(2) Value Added Tax Regulations 1995 but invite me to submit further evidence.
"I attach for your information a letter before action to Uber London Limited (“Uber”) dated 21 March 2017 together with Uber’s reply dated 3 April 2017.
"You will note from the correspondence that:
there is, and can be, no dispute about the fact of a supply of taxi services to me or the price I paid;
there is, and can be, no dispute that if the supply were made by Uber (a taxable person) the price paid includes an amount of input tax (corresponding to the amount of output tax for which Uber would on that basis be obliged to account for to HMRC); and
the reason why there is no VAT invoice recording VAT in the amount of £1.06 is simply that Uber denies that it has made a VATable supply: it says that it was its driver that made that supply.
"Given those facts (which are established by the evidence supplied with this letter and my letter of 30 June 2017) I can with respect see no basis for you to decline to exercise your discretion:
if you agree with Uber that the supply is made by the driver then the appropriate course is for you to raise an assessment against me under section 73(1) Value Added Tax Act 1994; and
if you agree with me that the supply is made by Uber then you ought to exercise your discretion to allow my claim for input tax.
"What would not be lawful would be for HMRC to leave this matter, and my tax liabilities, in limbo by declining to take, or unduly delaying, one or other of the above decisions.
"I await your further response."
We now wait to hear further from HMRC. When there is more news we will update you.
A little progress on Maugham's correspondence with HMRC about claiming the VAT back on an uber fare absent a VAT receipt
https://www.crowdjustice.com/case/uber/
Extract
In August, HMRC replied to Mr Maugham’s VAT Return asking for more information and he wrote back in the following terms:
"I write further to my letter of 30 June 2017 and your reply of 7 August 2017.
"In your reply you say you are presently unable to exercise your discretion under regulation 29(2) Value Added Tax Regulations 1995 but invite me to submit further evidence.
"I attach for your information a letter before action to Uber London Limited (“Uber”) dated 21 March 2017 together with Uber’s reply dated 3 April 2017.
"You will note from the correspondence that:
there is, and can be, no dispute about the fact of a supply of taxi services to me or the price I paid;
there is, and can be, no dispute that if the supply were made by Uber (a taxable person) the price paid includes an amount of input tax (corresponding to the amount of output tax for which Uber would on that basis be obliged to account for to HMRC); and
the reason why there is no VAT invoice recording VAT in the amount of £1.06 is simply that Uber denies that it has made a VATable supply: it says that it was its driver that made that supply.
"Given those facts (which are established by the evidence supplied with this letter and my letter of 30 June 2017) I can with respect see no basis for you to decline to exercise your discretion:
if you agree with Uber that the supply is made by the driver then the appropriate course is for you to raise an assessment against me under section 73(1) Value Added Tax Act 1994; and
if you agree with me that the supply is made by Uber then you ought to exercise your discretion to allow my claim for input tax.
"What would not be lawful would be for HMRC to leave this matter, and my tax liabilities, in limbo by declining to take, or unduly delaying, one or other of the above decisions.
"I await your further response."
We now wait to hear further from HMRC. When there is more news we will update you.
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