Uber and VAT

[hotchy]

Macski said:

Breadvan72 said:

I like this idea of "cooperation tax". It sounds very cuddly!

VAT is pretty much neutral once a business is actively trading - the business sets off the VAT that it pays on things that it buys against the VAT that it charges on things it sells, so VAT isn't really a gain for the business.

As for simplification - all desire it in all things, but in reality simplification rarely works outside engineering (and even there it has its penalties, often called "my Lotus is broken again"). That is why Bloke In Pub is usually wrong about most subjects.

BTW, re "VAT Tax", have a think about what the T in VAT stands for. See also: PIN, RAC, etc.

That is cool!

So the way to make tax law better is make it more complex?

T stands for tax I do believe which companies claim back, well these that are registered for VAT do, is that not an advantage? it was when I had a business made things 17.5% cheaper!

I fail to see anyway that being vat registered makes things cheaper?

You buy something, sell something for profit inc vat. Now you claim original 17.5 back, but pay 17.5 on larger amount you've sold. Hence you'll end up with a good few K vat bill every quarter.

[Eric Mc]

janesmith1950 said:

t won't because they'll have access to the cash, one way or another. What I expect it would mean is their pricing needing to rise by 20% or they absorb reduced margin (or they squeeze their drivers to).

Not looked at their accounts so no idea if there's a provision and cash set aside for the potential VAT liability.

They can factor in the VAT element for future sales by hiking their prices. The problem is with any backlog of VAT on historic sales. They can't do anything about that apart from taking it on the chin. You need an awfully strong chin to take a £1.5 billion blow.

[Eric Mc]

hotchy said:

I fail to see anyway that being vat registered makes things cheaper?

You buy something, sell something for profit inc vat. Now you claim original 17.5 back, but pay 17.5 on larger amount you've sold. Hence you'll end up with a good few K vat bill every quarter.

The Standard Rate of VAT in the UK has been 20% for a number of years.

[Murph7355]

JPJPJP said:

Eric Mc said:

I don't see anywhere in those Twitter comments that HMRC has actually assessed Uber in the UK for £1.5 billion unpaid VAT.

That is what the Court of Appeal case on 1 / 2 April is about Eric: The High Court ruled that HMRC could & should confirm the details of any assessment. Uber has appealed against that. Until that Appeal is heard, HMRC will not say either way on the record.

Meanwhile, this is being stated openly on twitter. Which wouldn't happen without reasonable consideration.

So TGLP are st stirring.

[Murph7355]

Macski said:

Companies should pay cooperation tax, rates and actually gain from VAT tax.

It is true the rules are the same for everyone but the larger you are the more you can advantage of the rules which should be simplified so there are no get out opportunities if your big enough to take advantage of them

Very few companies "gain" through VAT. It's pass through taxation in most cases.

The flat rate scheme gave (gives?) opportunity for gain in some cases. But guess what - that advantages small companies

For the rest, the customer pays it. Some can claim it back. Many cannot. The company providing the goods/services aren't gaining, the end customer is paying it.

Just as the end customer does with all company taxes ultimately.

If you want to simplify things, acknowledge that fact and take it from there.

The best answer to your latter paragraph is for companies to grow IF they want to get those same "advantages". But Newton's third law applies

With a tax code like ours you have to be mighty careful of unintended consequence. That's not to say it shouldn't/couldn't be changed. But reacting to what the Daily Mail, Labour front bench, TGLP and the Twitterati might think is the worst possible way forwards.

[lampchair]

Eric Mc said:

The question is, why didn't HMRC not query Uber's VAT status much, much earlier?

Already discussed a while back.

[anonymous-user]

Eric Mc said:

They can factor in the VAT element for future sales by hiking their prices. The problem is with any backlog of VAT on historic sales. They can't do anything about that apart from taking it on the chin. You need an awfully strong chin to take a £1.5 billion blow.

At the risk of repeating myself, Uber's chin is pretty sturdy

"At the end of Q4 2019 Uber had $11.3 billion cash & equivalents

So a £1.5 biillion vat bill would hurt, but it could come through it"

[anonymous-user]

Murph7355 said:

So TGLP are st stirring.

A little, yes.

But, as mentioned previously, Uber has declared a provision in it's accounts for the potential VAT liability

Also common sense leads one to wonder if Uber would carry the cost of an appeal (that it may or may not win) if the outcome of losing was for HMRC to share the good (to Uber) news that it had not assessed it to a whacking great big VAT bill

[Eric Mc]

JPJPJP said:

At the risk of repeating myself, Uber's chin is pretty sturdy

"At the end of Q4 2019 Uber had $11.3 billion cash & equivalents

So a £1.5 biillion vat bill would hurt, but it could come through it"

Is that worldwide income or just the UK?

When you say" Cash" are you talking about "Cash in Bank" - and what about the rest of its balance sheet? You can have loads of cash in the bank but if your liabilities are higher, you are still insolvent.

[skwdenyer]

Breadvan72 said:

Please read the post I was replying to. That post and my reply refer to VAT registered businesses.

With respect, the problem is that that does not apply to service businesses like Uber who sell mainly to non-VAT-registered consumers.

As the old saying goes, all generalisations are invalid including this one...

[Mrr T]

Eric Mc said:

hotchy said:

I fail to see anyway that being vat registered makes things cheaper?

You buy something, sell something for profit inc vat. Now you claim original 17.5 back, but pay 17.5 on larger amount you've sold. Hence you'll end up with a good few K vat bill every quarter.

The Standard Rate of VAT in the UK has been 20% for a number of years.

I assume Uber already charges VAT on its fee. So the additional VAT would only apply to the drivers charge.

[Mrr T]

Breadvan72 said:

Mind reading not being an actual thing, you have no idea of my understanding of VAT issues, and having done several cases for the government on VAT, I won't be attending any lectures by you on the subject, but thanks all the same.

Touchy today?

You said.

Breadvan72 said:

VAT is pretty much neutral once a business is actively trading - the business sets off the VAT that it pays on things that it buys against the VAT that it charges on things it sells, so VAT isn't really a gain for the business.

Since this thread is about Uber I assumed you referred to them. If you did then as I pointed out Uber and it's customers would be seriously impacted by the Good "left wing" Law proposal on VAT.

[Eric Mc]

Mrr T said:

I assume Uber already charges VAT on its fee. So the additional VAT would only apply to the drivers charge.

Don't know enough about the services they are providing to know where they are in dispute with HMRC

On what type of income is HMRC claiming Uber should be charging VAT?

HMRC VAT rules on taxis and private hire services -

https://www.gov.uk/guidance/how-vat-applies-to-tax...

Edited by Eric Mc on Thursday 27th February 10:43

[Mrr T]

Eric Mc said:

Don't know enough about the services they are providing to know where they are in dispute with HMRC

On what type of income is HMRC claiming Uber should be charging VAT?

HMRC VAT rules on taxis and private hire services -

https://www.gov.uk/guidance/how-vat-applies-to-tax...

While the service is subject the VAT most drivers operate below the registration threshold. So Uber maintain they just facilitate the booking so only the Uber fee is subject to VAT and the driver charge to the passangers is not because the driver is not VAT registered.

The Good "left wing" Law proposed is that the nature of Uber contract with the driver is such that Uber provide the whole service and the driver is just an employee or agent of Uber.

This of cause would mean the whole of the charge would be subject to VAT not just the Uber fee.

[paulrockliffe]

Mrr T said:

Eric Mc said:

Don't know enough about the services they are providing to know where they are in dispute with HMRC

On what type of income is HMRC claiming Uber should be charging VAT?

HMRC VAT rules on taxis and private hire services -

https://www.gov.uk/guidance/how-vat-applies-to-tax...

While the service is subject the VAT most drivers operate below the registration threshold. So Uber maintain they just facilitate the booking so only the Uber fee is subject to VAT and the driver charge to the passangers is not because the driver is not VAT registered.

The Good "left wing" Law proposed is that the nature of Uber contract with the driver is such that Uber provide the whole service and the driver is just an employee or agent of Uber.

This of cause would mean the whole of the charge would be subject to VAT not just the Uber fee.

I don't believe that Eric doesn't know the fundamentals of the case, they're pretty basic and easily accessible. As you say, not a question about VAT on taxis, but essentially on the relationship between Uber and the drivers. Wasn't there a judgement on whether the drivers are employees or not that is then relevant to the VAT question?

[Eric Mc]

I see.

The question is, is Uber one large business with lots of staff (therefore, is all the income generated by the work of the staff really Uber's income and subject in full to VAT or is Uber just liabile to VAT on the bit Uber takes from the drivers in the form of "Commissions" or "Management Charges".

I'm sure this scenario exists for hundreds of businesses - not just Uber.

[paulrockliffe]

Eric Mc said:

I see.

The question is, is Uber one large business with lots of staff (therefore, is all the income generated by the work of the staff really Uber's income and subject in full to VAT or is Uber just liabile to VAT on the bit Uber takes from the drivers in the form of "Commissions" or "Management Charges".

I'm sure this scenario exists for hundreds of businesses - not just Uber.

Probably, don't know if there are loads of follower cases stood behind this one or not, but whether there are or aren't the outcome will be significant for many more businesses. Pretty standard to only challenge in one case, or stand others behind a lead case, where the situation isn't clear-cut as the alternative is to gum up the courts addressing identical issues.

[Mrr T]

paulrockliffe said:

Wasn't there a judgement on whether the drivers are employees or not that is then relevant to the VAT question?

There have been several judgements against Uber on the nature of the relationship with drivers. However, these where all employment law cases so would not be relevant for a VAT case.

[Eric Mc]

Different areas of tax and business generate their own case law history which, ostensibly, are not linked. But these different regimes do pay regard to decisions made in other legal or tax areas.

Look out for multiple employment rights cases over the next few years following the implementation of the new IR35 regime in April. We've already had at least one such case regarding IR35 and the public sector.

[paulrockliffe]

Mrr T said:

paulrockliffe said:

Wasn't there a judgement on whether the drivers are employees or not that is then relevant to the VAT question?

There have been several judgements against Uber on the nature of the relationship with drivers. However, these where all employment law cases so would not be relevant for a VAT case.

As Eric says, there is indirect cross-over. Not read the Uber case, so not referring to that, but if a Court finds that workers are actually employees then that would have a bearing on any other tax issue where employment status is a factor or changes the relationship.

In the most indirect way, "In XXXXX vs the Crown we established that the relationship was that of employer and employer therefore...... " is a simple argument compared with attempting to determine that issue within another case. If it's not key to your argument you might keep the argument simple rather than opening a can of worms.