If Uber were made to pay the outstanding bill, it could lead to its fares increasing, according to a report from the Times.
Uber, which has more than 60,000 drivers in the UK, does not pay VAT on fares because the company says it is just a middleman between its self-employed drivers and passengers.
An HMRC spokesperson said, “We do not comment on identifiable businesses. HMRC will always make sure that every business, no matter their size, pays all the taxes due under UK law and we don’t settle for less.
“HMRC’s ability to assess for tax will always depend on the specific facts and circumstances of any case. This could include court decisions regarding other matters where appropriate.”
An Uber spokesperson said the company “fulfils and will continue to fulfil its tax obligations in the countries in which it operates.”
A report in 2017 suggested that Uber was using an EU tax loophole to avoid paying VAT on booking fees. By treating each driver as individual businesses and making them pay commission on booking fees to a subsidiary based in the Netherlands, Uber avoids paying any VAT to the UK government.
The loophole uses the reverse charge mechanism, originally established to simplify cross border transactions in the EU. This allows businesses to sell and trade across borders without paying VAT.
In November 2017, Uber failed to overturn an Employment Tribunal granting its drivers rights including holiday pay, sick pay and the national minimum wage. It is now appealing that decision to the Court of Appeal.
Originally published in Economia on 20 May 2019.