The entire taxi trade may have to increase their fares by 20% (VAT) following a decision in the High Court.
Here’s what we know:
- A decision by the Supreme Court in 2021 that drivers for Uber should be classed as workers brought tax obligations and other administrative changes for the app, which began collecting VAT in March 2022.
- It argued that private taxi operators outside London must change their operating terms and conditions with passengers in line with Uber’s obligations, meaning the operator is providing the taxi service as the principal not as an agent, and therefore is liable for VAT.
- While private drivers working for the operators generally fall below the UK VAT registration threshold of £85,000 and so do not charge VAT, operators are over the threshold and are liable.
- In November 2022, Uber announced it had resolved one VAT wrangle with HMRC by paying HMRC £615m to settle all outstanding claims. However, the sum was considerably lower than the £1.5bn number HMRC had estimated.
- Impacted clients should be aware of this very complex issue, including the significant tax obligations now coming their way.
- Cab companies now need to be adding VAT to their charges, which they typically will not have the accounting systems to calculate or invoice.
Recommendations from us:
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Ensure proper understanding of VAT and other tax laws as soon as possible by contacting us.
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If the correct VAT amounts are not levied from the start , significant losses will be made as these amounts cannot be recovered from customers at a later stage when tax authorities assess your business.
If your business needs help or guidance with accounting and finance management, contact us for a consultation.