HMRC demands £2.6bn from Uber

HMRC has hit Uber with a £2.6bn bill after the company allegedly failed to pay tax on millions of rides. The tax authority has resurrected a dispute with the ride-hailing app concerning how much VAT the company should charge on rides. Minicab operators such as Uber have been required to pay VAT on rides in London since a court defeat five years ago changed the company’s legal relationship with drivers. However, the company and rival Bolt had attempted to sidestep the charge by using a legal exemption designed for tour operators.

This would mean the company would only pay VAT on the cut it takes from drivers, which is generally a fraction of the total fare. HMRC argued the exemption was illegal and demanded that Uber pay VAT on the entire fare. The tax authority said this amounted to £1.4bn between 2022 and 2024. The tax authority had put its demands on hold after Bolt won legal victories in a parallel case. However, this summer, the Court of Appeal struck down Bolt’s challenge.

In US stock-market filings, Uber revealed that HMRC had demanded an additional £1.2bn, bringing the total bill to £2.6bn. “We have received multiple assessments from HMRC disputing our application of VAT,” the company said. Uber said it would pay the bill but planned to appeal to the tax tribunal to recover the funds. It added that it planned to “vigorously defend” its use of the tour operators’ exemption despite Bolt’s defeat and was waiting for a hearing date at the tax tribunal.

Last year, Rachel Reeves blocked apps such as Uber from using the exemption in a move that the industry called a “taxi tax” . The Treasury accused operators of “exploiting” a tax loophole. The ride-hailing app warned that paying VAT could mean fewer opportunities for drivers. Andrew Brem, its UK boss, also warned that the change would mean higher prices, although the company has since rewritten contracts so the tax applies only in London.

Uber did not comment beyond the filing. HMRC said it could not comment on individual companies. London is one of Uber’s top markets, and the company has recently started testing self-driving vehicles in the capital in a tie-up with British start-up Wayve. Last week, the company said it planned to have 2,000 driverless vehicles in operation by the end of next year. Uber defeated a group of taxi drivers who sought to bring a High Court case against the company, arguing it used illegal tactics to win an operating licence in 2012.