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Amid Gig Economy Tax Debate, Deliveroo Wins Key Ruling

by Jason Gorringe, Tax-News.com, London

17 November 2017


Following a damning ruling against gig economy ride-hailing service Uber, which provided that its drivers are entitled to rights typically reserved for employees, Deliveroo has successfully argued that its gig economy delivery drivers, of takeaway food, are self-employed.

Uniquely in the case of Deliveroo, it was agreed that its relationship with its riders does not constitute an employer-employee relationship. Special importance was given to the fact that riders can substitute themselves by asking another rider to take a job, even after accepting it. The ruling came from the Central Arbitration Committee on November 14, 2017.

An earlier ruling against Uber from the London Employment Tribunal, upheld this month on appeal, had raised concerns that digital economy companies could face footing taxes normally borne by traditional employers on behalf of those making a living by offering services to users through their gig economy, web-based applications. Uber is expected to appeal again.

The Uber case was seen as a major setback for the development of the gig economy, which has appealed to individuals as it has all but eliminated the barriers to market entry in many markets, such as the provision of accommodation services, or slashed associated operating costs. The Tribunal decided that Uber drivers are entitled to receive holiday pay, a guaranteed minimum wage, and are entitled to breaks. It was decided that Deliveroo need not provide the same benefits.

Although the ruling did not discuss tax implications for Uber, the ruling could open the door to Uber becoming liable to taxes in the UK for its drivers, such as National Insurance (social security) contributions. It could also potentially result in a change to its VAT treatment.

The Good Law Project has launched legal action concerning Uber's VAT arrangements. Jolyon Maugham QC is seeking a decision from the High Court over whether the supplies facilitated by Uber should be liable to VAT – specifically he is asking whether a supply is made by an Uber driver, or whether the supply is made by Uber, by asking questions about his eligibility to an input tax credit for VAT that would be liable on a fare paid.

Given the potential tax advantages that could potentially be lost by gig economy firms as a result of the Uber ruling, the ruling in favor of Deliveroo will be welcomed by many business owners.

TAGS: individuals | Insurance | tax | business | value added tax (VAT) | law | employees | United Kingdom | food | social security | individual income tax | services | Employment

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