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Tax Fallout From Uber's Lost Appeal On Employment Rights

by Jason Gorringe, Tax-News.com, London

13 November 2017


Per the findings of a London-based Tribunal, Uber, and other gig economy companies like it, may face footing taxes normally borne by traditional employers on behalf of those making a living by offering services to users through its app.

Uber has failed to appeal a potentially devastating ruling from London's Employment Tribunal last year that it should offer its drivers the same employment rights as traditional taxi service operators, rather than its drivers being unconnected self-employed persons. In a November 10, 2017, ruling, London's Employment Appeal Tribunal upheld the ruling. Uber is expected to appeal again.

The case is 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.

In November 2016 the London Employment Tribunal ruled against Uber and in favor of GMB, the union for professional drivers, which had brought a case on behalf of two drivers. GMB reported the Tribunal had determined that Uber had acted unlawfully in not providing the drivers with basic workers' rights. It has decided that Uber drivers are entitled to receive holiday pay, a guaranteed minimum wage, and are entitled to breaks.

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.

TAGS: individuals | Insurance | tax | value added tax (VAT) | law | employees | United Kingdom | self-employment | social security | Employment | BEPS

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