UBER – avoidance (or not) and other issues

28 May 2019

There was in an interesting article in the Sunday Times last week that suggests UBER’s business model leads to a multi-million VAT loss to the Treasury annually. This reflects a long-running issue in respect of taxation and UBER.

How is this achieved?

UBER argues it is a digital platform, not a taxi company.  For these purposes, it is based in the Netherlands and so outside the UK for VAT purposes.

This means:

  • UBER does not charge Dutch VAT to their customers (the taxi drivers) as the services are received in the UK so the supply is outside the scope of Dutch VAT;
  • As the taxi drivers are based in the UK and receive the services for their business purposes they have the obligation to account for VAT. However, even with the value of these received supplies taken into account, most are below the VAT registration threshold.

The consequence of this is no VAT is due in either the Netherlands or the UK.

What is the consequence of this?

It will cause a distortion of competition with other taxi companies including black cabs as they will be obliged to account for VAT whereas UBER avoid this charge. It also means activities that were intended to be taxed are not.

It can cause issues for unsuspecting taxi drivers who may not realise that the services they received from UBER count towards their VAT registration threshold. This can trip them into VAT registration and require them to account for VAT of 20% of their earnings.

Is this the right analysis?

The key issue is what is UBER supplying? If it is really a digital service merely introducing drivers to passengers then the treatment is correct.

However, the European Court of Justice has considered the activities of UBER from a regulatory perspective following a challenge by Spanish taxi drivers. The Court concluded that UBER was providing transportation services and subject to regulation. This is a powerful and compelling analysis that provides the authorities with a basis to challenge the VAT treatment applied and correct the VAT treatment.

Further, if we consider the relationship between UBER and the driver, there is an interesting parallel to the gig economy cases.  Does this support the case that the driver is, in reality, an employee of UBER?


There is a big prize in respect of the VAT that could be collected – millions per annum. There is wide support, if not demand, for action against avoidance schemes. However, it seems unlikely UBER would have implemented the model without seeking a clearance from HMRC which would prevent any retrospective tax collection.

Given HMRC’s aggressive stance in other areas of perceived avoidance (for example personal service companies cases against BBC presenters – which would bankrupt the individual, involving retrospective action where facts were clearly known and accepted at the time) it seems odd they are passive on this occasion given the distortion of competition and tax loss.

What next?

If UBER wanted to be tax compliant and work within the spirit of the legislation, it could provide the services from the UK which would ensure UK VAT was accounted for.  However, their position is not unlawful.

Under the current model, and the perceived lack of action by HMRC, this could oblige others to follow the ‘UBER’ model to maintain competitiveness – which will increase losses for the Treasury. Even if HMRC consider it cannot win the case on merit, you would expect the introduction of an anti-avoidance measure to ensure taxation and ensure fair competition with those who cannot afford to adopt the ‘UBER’ model.

If you want advice in this area, or any other aspect of VAT and taxation, please do not hesitate to contact me or your local UHY specialist to discuss your options.