The High Court has held that it was unlawful for a private hire vehicle operator to act as an agent between a driver and passenger, meaning that the operators themselves, rather than individual drivers, contract with passengers.
The Supreme Court decision in Uber v Aslam[2021] UKSC 5 previously found that drivers who worked through the operator’s smartphone app were workers and so qualified for various rights. In that decision, Lord Leggatt also raised the prospect of the company being in contravention of transport law.
This point was taken forward in the High Court in United Trade Action Group Ltd, R (oao) v Transport for London (Rev1)[2021] EWHC 3290 (Admin) which held that in order to operate lawfully: ‘a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking’.
Many operators adopt models under which the individual driver provides the services, and the operator takes a cut of the fee received by the drivers. Individual drivers are unlikely to breach the VAT registration threshold, and any standard-rate VAT on Uber’s booking fees is likely to be accounted for under the reverse charge (with the relevant Uber company based in the US) – resulting in transactions effectively being VAT-free.
The High Court decision means that the operator rather than the individual driver is supplying the services, which are likely to be standard-rated supplies for VAT purposes. In a filing to the US Securities and Exchange Commission in 2019, Uber disclosed that classification as a ‘transportation provider’ would expose it to VAT on gross bookings ‘both retroactively and prospectively’ – a bill which the Financial Times estimated could cost more than £1bn.
The High Court has held that it was unlawful for a private hire vehicle operator to act as an agent between a driver and passenger, meaning that the operators themselves, rather than individual drivers, contract with passengers.
The Supreme Court decision in Uber v Aslam[2021] UKSC 5 previously found that drivers who worked through the operator’s smartphone app were workers and so qualified for various rights. In that decision, Lord Leggatt also raised the prospect of the company being in contravention of transport law.
This point was taken forward in the High Court in United Trade Action Group Ltd, R (oao) v Transport for London (Rev1)[2021] EWHC 3290 (Admin) which held that in order to operate lawfully: ‘a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking’.
Many operators adopt models under which the individual driver provides the services, and the operator takes a cut of the fee received by the drivers. Individual drivers are unlikely to breach the VAT registration threshold, and any standard-rate VAT on Uber’s booking fees is likely to be accounted for under the reverse charge (with the relevant Uber company based in the US) – resulting in transactions effectively being VAT-free.
The High Court decision means that the operator rather than the individual driver is supplying the services, which are likely to be standard-rated supplies for VAT purposes. In a filing to the US Securities and Exchange Commission in 2019, Uber disclosed that classification as a ‘transportation provider’ would expose it to VAT on gross bookings ‘both retroactively and prospectively’ – a bill which the Financial Times estimated could cost more than £1bn.
