Uber avoids VAT

Uber has not been paying VAT on its taxi fares, reports Reuters.

File illustration picture showing the logo of car-sharing service app Uber on a smartphone next to the picture of an official German taxi sign

Uber is popular because it is cheap. It undercuts regular tax fares. One way it does that is by subsidising fares and absorbing large losses, and the other way is by not paying VAT.

Uber avoids VAT because all its drivers are each registered as separate businesses and their individual incomes are too small for them to need to be registered for VAT.

Uber has 40,000 UK drivers and estimates the cost to of paying VAT would be £1000 per driver per year.

The UK market is important to Uber because it accounts for a third of all Uber’s European revenues.


Comments

5 comments

  1. Thanks for the explanation Fred, IMHO VAT is a catalyst for a cash economy.

  2. Legally illiterate nonsense! Mark Poles FCA, this morning a tax barrister started a legal action against Uber for not paying VAT.

    https://www.ft.com/content/190f12c4-0d92-11e7-a88c-50ba212dce4d

    Next time, check the basic facts of your comment with a lawyer.

    • VAT is a horribly complex system where in basic terms each little bit of the chain claims back VAT on what they’ve bought and charges VAT on what they’ve sold, hence the “value added” bit is what you end up paying net. Modern IT accountancy systems help simplify the process, thank god, but it’s still a really horrible bureaucratic driven system especially for small to medium size enterprises. Even shipping within the Euro Zone is a nightmare -too many stupid rules and different VAT tax rates as well. At the end of the day it’s just a tax and an highly inefficient one at that. Fold it back into corporation tax or something to make up the difference and sack the unnecessary bureaucrats.

      • So, lets say you get an Uber ride for 12 pounds. OK, Uber pays the driver 10 pounds and pockets the 2 pound difference. OK, the customer still pays 12 pounds but Uber is due to pay VAT on the ( value added ) difference, in this case 2 pounds. Assuming VAT of 20%, then Uber owes HMRC 40 pence for this fare. Simplified, but basically that’s how it’s supposed to work.

  3. Financially illiterate nonsense! Uber doesn’t pay VAT. Neither does any VAT-registered business. VAT is paid by the CUSTOMER! Businesses only COLLECT it, and offset the input VAT collected from them by their suppliers. So since Uber doesn’t pay VAT, how can it avoid it?

    Next time, check the basic facts of your story with an accountant.

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