Uber and VAT

[Alpinestars]

JPJPJP said:

There is a piece here from 12 May on Bloomberg BNA titled "EU Court Aide Ruling Delivers Blow to Uber's UK VAT case"

https://www.bna.com/eu-court-aide-n73014450820/

"The EU’s top legal adviser has dealt a blow to Uber Technologies Inc.’s plan to fight claims for unpaid value-added tax in the U.K., classifying it as a transport provider instead of a technology platform."

In the first reference I have so far seen to any comment on the matter by Uber, this article contains

"Commenting on the pending VAT case, Uber said in a statement that drivers who use its smartphone application will be registered for the indirect tax if they meet the U.K.’s threshold of 85,000 pounds.

This has been the case across the taxi and private hire industry for decades,” the statement said. Black cab drivers and the apps they use, such as Gett or myTaxi, “operate in exactly the same way

This claim is fundamentally flawed on a number of levels,”

I'm pretty sure that radio jobs received by a black cabbie are paid to them net of VAT.

[skwdenyer]

Alpinestars said:

I'm pretty sure that radio jobs received by a black cabbie are paid to them net of VAT.

For a radio car account customer, the customer calls the office, the office says "yes we'll get you a cab." Contract formed. It is for the office to fulfill. Cabbie is a supplier to the office, not to the customer. Office collects monies from customer.

For a radio car cash customer, I believe HMRC treats the office as a supplier to the cabbie (a booking agent). Office takes the booking as agent for cabbie, but customer pays cabbie in cash.

Uber's argument is that their platform puts the customer directly in touch with the driver - the customer offers, the driver accepts, the contract is formed.

The counter view is that, since Uber mandate payment always via them, that that makes every booking an "account" booking in the above scenario.

Edited by skwdenyer on Saturday 27th May 12:04

[Alpinestars]

skwdenyer said:

Alpinestars said:

I'm pretty sure that radio jobs received by a black cabbie are paid to them net of VAT.

For a radio car, the customer calls the office, the office says "yes we'll get you a cab." Contract formed. It is for the office to fulfill. Cabbie is a supplier to the office, not to the customer.

Uber's argument is that their platform puts the customer directly in t

I understand the argument. Thanks.

I'm pointing out that as things currently stand, I'm pretty sure that when black cabbies are given a radio job (compared to a flag down), VAT is accounted for.

[skwdenyer]

Alpinestars said:

I understand the argument. Thanks.

I'm pointing out that as things currently stand, I'm pretty sure that when black cabbies are given a radio job (compared to a flag down), VAT is accounted for.

Sorry, not trying to teach grandma etc...

I've edited my answer above. Not every radio job is the same for vat.

[Alpinestars]

skwdenyer said:

Alpinestars said:

I understand the argument. Thanks.

I'm pointing out that as things currently stand, I'm pretty sure that when black cabbies are given a radio job (compared to a flag down), VAT is accounted for.

Sorry, not trying to teach grandma etc...

I've edited my answer above. Not every radio job is the same for vat.

Thanks. Understood.

[PurpleMoonlight]

I buy something from a business via the ebay platform, who impose certain rules on the seller and require the purchaser to register.

I pay for that via paypal (owned by ebay) who will take their commission and pass the balance to the business.

The goods are supplied direct to me together with a receipt from the business.

Is anyone saying ebay should be charging VAT on everything purchased via their platform?

[The Mad Monk]

JPJPJP said:

There is a piece here from 12 May on Bloomberg BNA titled "EU Court Aide Ruling Delivers Blow to Uber's UK VAT case"

https://www.bna.com/eu-court-aide-n73014450820/

"The EU’s top legal adviser has dealt a blow to Uber Technologies Inc.’s plan to fight claims for unpaid value-added tax in the U.K., classifying it as a transport provider instead of a technology platform."

In the first reference I have so far seen to any comment on the matter by Uber, this article contains

"Commenting on the pending VAT case, Uber said in a statement that drivers who use its smartphone application will be registered for the indirect tax if they meet the U.K.’s threshold of 85,000 pounds.

This has been the case across the taxi and private hire industry for decades,” the statement said. Black cab drivers and the apps they use, such as Gett or myTaxi, “operate in exactly the same way

This claim is fundamentally flawed on a number of levels,”

You are still grinding away at this axe.

Come on, what is your hidden agenda?

[anonymous-user]

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.

[Chrisgr31]

The Mad Monk said:

You are still grinding away at this axe.

Come on, what is your hidden agenda?

I may have missed it, but whats yours?

[skwdenyer]

It is interesting to read opinions of people who say something like "come on, why do you care, this isn't your problem? can't you just let people get on with things?" etc. Speaking only personally, I find it strange to walk through life turning a blind eye to things that are - to me - just wrong.

Edmund Burke said:

All that is necessary for the triumph of evil is that good men do nothing.

The issues with Uber are manifold, but include:

• Uber are using cross-border accounting to siphon money out of the UK, an option clearly not available to the majority of market participants (see http://fortune.com/2015/10/22/uber-tax-shell/ for instance)
• the charge-by-the-mile-in-London model was one begged-for over many years by other players (e.g. Addison Lee), but refused by the PCO - it was only Uber's "might is right" approach (and their lack of risk, as they claimed to not be the service provider and did not own cars) that in essence forced that through
• Uber's terms are just not the same as the typical minicab operator - there are intrinsic differences

It cannot be reasonable that, under the guise of being "disruptive," well-funded startups can just bulldozer over existing laws on the assumption that they will sort it out later on, can it? Can you imagine a UK business doing that in the USA and succeeding?

Uber claims to be a "marketplace" but in reality it is nothing of the sort; there's no competition for different offerings or pricing between marketplace participants. Every participant has to sell the same thing, in the same way, at the same price, under Uber's terms and using Uber's payment method.

As a society, we've grown used to this sucking out of money by internet companies like Google - after all, they deliver their services virtually, from anywhere. But sucking money out of the economy, tax-free, for a physical service delivered to your door? That sucks. That's a different rubicon. Uber can, and should, be held accountable.

In my view, it is not wrong for a concerned citizen or two to bring a court action against a company for an abuse. If the claim is without any foundation, it will be thrown out. Uber is worth so many $billions that the legal fees are a non-issue for them. A sane government would have already noticed this tide in sentiment and announced an investigation or - even better - done something. In the absence of that, and in a sad but established tradition in this country, the first shots must be fired by individuals.

Actions like this are - I hope - a portent of far more direct action against multinational interests, where those run so clearly counter to the interests of the average citizen.

Just my two pence worth...

[The Mad Monk]

skwdenyer said:

Just my two pence worth...

Fair comment and well made.

I have no quarrel with that.

[havoc]

skwdenyer said:

Just my two pence worth...

Well and eloquently put.

[maffski]

PurpleMoonlight said:

So basically they want to sue Uber with someone else's money and don't want to have to pick up Uber's tab if they lose.

You shouldn't be so cynical of Soapy Jo and his desire to do what's right regardless of the risk to himself. It's not like he also took £70k from the public to block Brexit in the Irish courts, and now the Irish government have said they'll fight it caved in and abandoned the litigation - having 'spent' all the money obviously.

(Rather iffy logic being Brexit affects the Common Travel Area, which is in Irish law and so the Irish should be able to refer it to the European Court of Justice - oddly the Irish don't really want to set that precedent)

The Crowd Justice case
Guido

[Murph7355]

skwdenyer said:

The issues with Uber are manifold, but include:

• Uber are using cross-border accounting to siphon money out of the UK, an option clearly not available to the majority of market participants (see http://fortune.com/2015/10/22/uber-tax-shell/ for instance)
• the charge-by-the-mile-in-London model was one begged-for over many years by other players (e.g. Addison Lee), but refused by the PCO - it was only Uber's "might is right" approach (and their lack of risk, as they claimed to not be the service provider and did not own cars) that in essence forced that through
• Uber's terms are just not the same as the typical minicab operator - there are intrinsic differences

It cannot be reasonable that, under the guise of being "disruptive," well-funded startups can just bulldozer over existing laws on the assumption that they will sort it out later on, can it? Can you imagine a UK business doing that in the USA and succeeding?
...

Personally I have no issue with Uber being taken to task for its practices. But there are official bodies set up to deal with each of your concerns.

It feels entirely wrong to me that a crowd funded "individual" can use the courts in this way with a very, very thinly veiled cover of "yes but I want a receipt".

The consequences of this could very easily be "well funded company operators" protecting their turf using litigation against new entrants to the market. Defending this sort of case will probably be expensive and time consuming. Probably not an issue for Uber. But it could be for other firms starting out. Perhaps firms that you have less of an issue with. Unintended consequences and all that...

IMO the correct course of action to your points would be:

1) Report it to HMRC. Leave them to deal with it.
2) Report it to TfL or whichever other authority governs your particular patch and let them deal with it.
3) Do nothing. So what. Businesses come up with different models all the time to take advantage of the market. This should generally be welcomed.

If (1) or (2) find an issue I'm quite sure Uber will not be dealt with any differently to any other firm.

Uber have been around a while now...I'd be surprised if some attention hadn't already been given to them. But if it hasn't, I would also assume that means there are more pressing cases for the authorities to deal with. Is this case trying to get Uber bumped up that queue? If so, why? And is that healthy?

I also find it incredibly hard to believe that the lawyer involved is doing this out of the goodness of his heart and for the greater good of the UK populace

[skwdenyer]

Murph7355 said:

Personally I have no issue with Uber being taken to task for its practices. But there are official bodies set up to deal with each of your concerns.

It feels entirely wrong to me that a crowd funded "individual" can use the courts in this way with a very, very thinly veiled cover of "yes but I want a receipt".

The consequences of this could very easily be "well funded company operators" protecting their turf using litigation against new entrants to the market. Defending this sort of case will probably be expensive and time consuming. Probably not an issue for Uber. But it could be for other firms starting out. Perhaps firms that you have less of an issue with. Unintended consequences and all that...

IMO the correct course of action to your points would be:

1) Report it to HMRC. Leave them to deal with it.
2) Report it to TfL or whichever other authority governs your particular patch and let them deal with it.
3) Do nothing. So what. Businesses come up with different models all the time to take advantage of the market. This should generally be welcomed.

If (1) or (2) find an issue I'm quite sure Uber will not be dealt with any differently to any other firm.

Uber have been around a while now...I'd be surprised if some attention hadn't already been given to them. But if it hasn't, I would also assume that means there are more pressing cases for the authorities to deal with. Is this case trying to get Uber bumped up that queue? If so, why? And is that healthy?

I also find it incredibly hard to believe that the lawyer involved is doing this out of the goodness of his heart and for the greater good of the UK populace

Your points are also fair. And in a well-functioning society, I'd agree with many of them. But I have little or no faith in HMRC's ability to engage with things in anything other than a blunderbuss approach.

I've lost count of the number of genuine ongoing VAT (and other tax) frauds I've reported to HMRC over the years. In detail, with dates and times and participants and processes. I've delivered to them genuine "turn up and do this and you'll see the fraud" instructions and evidence and I've waited. And waited. And waited. And nothing.

Private prosecutions are gathering pace; some notable fraud and copyright cases have come to trial and resulted in prison sentences. It doesn't matter whether the state should ideally deal with these matters; the reality is that the state frequently does nothing. In "the old days" of course, every prosecution was private, unless it directly involved the Crown.

As regards TfL, yes, eventually things happen. Yesterday TfL granted Uber a temporary private hire licence for 4 months (rather than renew the 5 year licence that started in 2012 and which was due to expire on 30th June). Temporary because their are big unanswered questions apparently. IMHO any other operator would not get a licence of any kind until TfL were happy; Uber are being allowed to continue to operate - and profit - whilst their application is properly assessed! http://www.refinery29.uk/2017/05/156519/uber-londo...

5 years of competition from an operator TfL still won't formally decide is operating within the law? Many think that sort of thing is just a bad joke played-out at the expense of society.

Uber had admitted that they use (or, ah-hem, have used) software deliberately to frustrate the efforts of law enforcement officials. And those officials' reactions? I can hear the sound of silence, as the song might have said...

Uber continues to fight TfL in court over the latter's imposition of what (as a lay customer) I think are perfectly reasonable requirements for, say, literacy - http://www.cityam.com/260212/taxi-uber-high-court-... - right now Uber seem happy to take on drivers who can't even necessarily read the contract they're signing with Uber...

Note: in that last case, Counsel represented both Uber and 3 sample PHV drivers affected by the changes to the tests - this was precisely the sort of thing you seem to be arguing against, is it not? Or do you only care about Private-v-Private cases and not Private-v-Regulator/State? I doubt the PHV drivers concerned were footing their own bills...

Oh and the case about Uber and workers' rights? That was brought by the GMB: http://www.gmb.org.uk/newsroom/gmb-calls-on-hmr-to...

And where is HM Government in all of this? Nowhere. Silent. All of the "action" is in London, where there is a regulator trying to do something. Or amongst unions (who are doing what unions are supposed to do). Or by TfL (except they only govern London).

Lord Hewart CJ said:

it is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done.

R v Sussex Justices, Ex parte McCarthy ([1924] 1 KB 256, [1923] All ER Rep 233)

As regards your point 3, I respectfully disagree, for many reasons including those I set out in my earlier post on the topic. The debate is not about a "different model" - something I applaud - but about whether it is acceptable and reasonable that a well-funded multinational operator should pitch up in my town / village / wherever and drive out local competition by operating in such a way as to be - at least - of dubious legality? If the regulator does nothing, should I take that as a sign of lawfulness, or a sign of apathy, or a sign of bowing to the winds of well-funded corporations?

Uber are not a start-up. They have been operating in the UK for 5 years. The regulators and organs of state have had plenty of time to consider their model, consider opinion, and take action. I agree that there is some moral hazard but, equally, the law hasn't recently changed to allow such actions; my support (or otherwise) for the case against Uber will have no bearing on whether another case comes forward.

When abuses happen, it is - in my view - legitimate for members of the public to do something to defend the society they live in with legal action. On other threads on this 'ere forum, we've watched eBay sellers driven out of business by illegally-operating opponents (no VAT, postage fraud, all manner of other things) - whilst, maybe, a regulator might eventually act, it may - and often is - not before hundreds of legitimate businesses are driven to the wall.

That is not good enough for a great many people. Justice must be seen to be done. In Uber's case, TfL were public in stating that they'd referred Uber to HMRC back in 2014, recognising that this was a matter of legitimate public interest - http://www.bbc.co.uk/news/business-29632646[/url].... which lend weight to the idea that Uber drivers aren't really self-employed people who understand what is going on.

To stop this in its tracks, HMRC have only to say "we've considered the VAT question; it is settled; there is no case." Easy. If they have not done so after 5 years of complaints then what? Everyone should sit back? The Good Law people can then choose to launch a Judicial Review of HMRC's decision (which seems to be a route of legal action with which you are presumably happy, as it is against the state and not an individual participant). But no such route is open, it seems.

I really do wish I had your faith in "public bodies" but in many decades of business I have never once had cause to believe that a public body could operate fast enough, or directly enough, to prevent an actual market abuse from causing actual harm to market participants. And that is terrible for everyone - including potential new participants who need to know if they can operate or not (assuming they don't have large amounts of US money behind them).

[Mrr T]

skwdenyer said:

The issues with Uber are manifold, but include:

• Uber are using cross-border accounting to siphon money out of the UK, an option clearly not available to the majority of market participants (see http://fortune.com/2015/10/22/uber-tax-shell/ for instance)

Just my two pence worth...

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.

[anonymous-user]

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.

[anonymous-user]

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?

[anonymous-user]

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."

[havoc]

JPJPJP said:

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?

Investors will have to suck it up - they own share capital, that is all. They can of course vote-out the current management team.

Creditors - as long as Uber is solvent they won't care. If Uber stops being solvent they will care a lot, but it'll be tough luck. Of course, HMR&C is no longer a preferential creditor, so if this appeal is successful and turns Uber insolvent it could collapse Uber in the UK...at which point very few people will get any money...