HM Revenue & Customs (HMRC) could be forced to repay Uber up to £1.3 billion following a major court loss in its efforts to charge VAT on minicab fares.
The tax authority suffered a significant blow after failing to overturn a ruling against Bolt, Uber’s Estonian-based rival. The outcome is expected to set a precedent for other ride-hailing firms, including Uber, which has been disputing a £1.3 billion VAT bill since 2022.
If Uber’s own legal challenge—based on similar arguments to Bolt’s—is successful, HMRC would be obligated to reimburse the company.
The dispute stems from a 2022 court ruling that required Uber, Bolt, and other minicab platforms to reclassify their drivers as workers rather than self-employed contractors, prompting changes to their legal and tax structures.
The tax authority’s position was weakened after it failed to overturn a key ruling in favour of Bolt—Uber’s Estonian rival—which successfully argued that ride-hailing platforms should be taxed under the Tour Operators’ Margin Scheme (TOMS). This scheme, typically used by travel agents, applies VAT only to the margin earned, rather than the full transaction amount.
The decision, upheld on Monday by the Upper Tribunal of the Tax and Chancery Chamber, has significant implications for other ride-hailing apps, particularly Uber, which has been locked in a legal battle with HMRC over a £1.3bn VAT bill levied since 2022.
Uber has paid hundreds of millions of pounds in VAT annually since a legal change in 2022 forced platforms to classify drivers as workers rather than self-employed. This reclassification made the apps the principal service providers, not just intermediaries—rendering them liable for VAT on passenger fares.
However, Uber and Bolt maintain that VAT should apply only to their service fees—not the full fare. Uber typically takes a 25% cut of each ride, while Bolt charges between 15% and 20%.
Uber’s own legal challenge, which mirrors Bolt’s arguments, has been paused pending the outcome of the Bolt case. With HMRC’s appeal now dismissed, a successful ruling for Uber could trigger a massive tax refund. HMRC is currently reviewing whether to escalate the matter to the Court of Appeal.
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