Uber faces a tax dispute with the UK’s tax authority, HM Revenue and Customs (HMRC), as the latter demands an additional £386 million in VAT payments.
The disagreement revolves around Uber’s use of the Tour Operators Margin Scheme (TOMS) for its UK business, potentially impacting the company’s financials significantly.
Applying TOMS to Uber’s Services
TOMS requires businesses in the tour and travel industry to pay VAT on their margin, not on the selling price. Uber contends that TOMS should apply to their services, arguing that not using the scheme could lead to increased fares for passengers.
HMRC challenges Uber’s application of TOMS, arguing that the company plays a more extensive role than a typical travel agent. According to HMRC, Uber shapes every aspect of the services provided by its drivers, making them more akin to employees rather than independent travel agents.
The Ongoing Dispute and Its Industry-Wide Impact
The ongoing dispute holds significance for the ride-hailing industry in the UK and beyond. Businesses and tax experts await a resolution that clarifies TOMS’ applicability to Uber’s operations, setting a precedent for the sharing economy.
This isn’t Uber’s first UK tax challenge. In November 2022, they paid £615 million to settle an investigation into unpaid VAT. Previously, Uber claimed VAT exemption, which was invalidated by a Supreme Court ruling that classified their drivers as employees.
A court date is yet to be set for the current case, and both parties hope for a swift resolution. The outcome may have implications for other firms in similar industries.
