Assume you are a taxpayer who has been underpaying tax for years. The law allows HMRC to collect some of that tax. But it also imposes limits on how far into the past HMRC can go. Underpayments further into the past than the law permits cannot be collected: the taxpayer will get away with having underpaid tax.
What are those time limits? Well, ignoring instances where the taxpayer has been dishonest, they are, in the case of VAT, a maximum of four years – but they may be as few as two.
The formal mechanic by which HMRC collects underpaid tax is an ‘assessment’. And because of the time limits, when HMRC discovers a potential underpayment by a taxpayer going back into the past, its practice is to raise an assessment to protect its position. That way, if the potential underpayment does turn out to be an actual underpayment the taxpayer doesn’t get away with its underpayment of tax.
Raising a protective assessment doesn’t impose any obligation on HMRC to collect the tax. Nor does it impose an obligation on the taxpayer to pay it. It’s a protective or precautionary step – simple good practice – to look after the position of taxpayers generally: your position and my position.
Now.
An Employment Tribunal has decided that Uber is supplying transportation services. The consequence of that decision is that Uber should be charging VAT to customers and paying it to HMRC. And that will be true not just now but for the whole period for which Uber has operated in the UK, a period of longer than four years.
An Advocate General at the European Court of Justice has also said Uber is supplying transportation services. And I think those decisions are right. And I am a QC specialising in tax, so this is a view I am entitled to hold. I have also taken formal advice from another QC who specialises in VAT.
If we are right – QC, Employment Tribunal, Advocate General – Uber’s VAT liability could very easily exceed £200 million a year.
It is, of course, possible however unlikely that we are all wrong. Uber’s appeal against the Employment Tribunal could succeed. The Court might not follow its Advocate General. QCs are not always right.
So what should HMRC do in this situation? If you read the first part of this blog post, you won’t find that a difficult question to answer. It should raise protective assessments before the sands of time run out. So as to protect its ability to collect from Uber the VAT that the courts presently suggest Uber must pay.
If we are all wrong, HMRC can abandon those assessments. But if we are right, raising those assessments will mean that Uber does not get away with it. And you and I do not miss out on hundreds of millions of pounds of vitally needed funding for public services.
But by failing to raise protective assessments, HMRC guarantees Uber gets away with it. Even if any remaining doubt about Uber’s VAT liability disappears, HMRC will be unable to collect those hundreds of millions of pounds.
Uber says that HMRC has not raised a protective assessment. If Uber is telling the truth – and it has made a sworn witness statement to similar effect – then HMRC’s conduct is completely inexplicable. HMRC is simply throwing away, and with no good reason, the chance to collect from Uber hundreds of millions of pounds.
I can see no good reason why HMRC should adopt this stance. None at all. It is inexplicable to me – unless HMRC’s conduct is motivated by factors otherwise than collecting the tax demanded by the law. I do not know what those factors might be. But this smells very bad.
Waiting for Godot 
Or, HMRC have looked at the point and for the periods in question have considered that there is no liability. They may have already considered the point, for periods in question, prior to the Employment Tribunal and ECJ judgement.
They may well not have, but it is a possibility
I suggest you also raise the matter with the Comptroller and Auditor General and the Chair of PAC.
What about a Freedom of Information Request to HMRC to find out whether they have raised a protective assessment, and if not why not?
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Presumably HMRC cannot comment on individual cases, so they will never disclose what they did, and why. Thus they cannot defend your accusation. easy target, really.
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They probably haven’t got enough staff to do it. They are making all the experienced staff redundant.
HMRC only have so little staff, and there are so many individuals to drive to bankruptcy and suicide via APNs, the “2019 loan charge”, and all other manners of due-process-denying, retrospective laws yet to be invented…
They just don’t have resources left to deal with tax-avoiding multinationals.
No conspiracy. Just priorities.
Maybe it’s just me but you say the various legal persons, including yourself, have determined the Uber SHOULD have been CHARGING vat. I don’t think a company should get away with not paying their liabilities but to date Uber haven’t been charging vat, it’s not like their prices have included vat that hasn’t been paid to HMRC, it simply isn’t there. Going forward, if it’s determined that Uber should indeed be charging vat, or if that has already been determined, then the company’s prices need to rise by 20% to take vat into account, become Vat registered and start paying it.
I’m not saying that trading without charging Vat isn’t wrong, a company should be aware of its liabilities, the company’s accountants should have made them aware (I don’t know Uber’s business structure). But doesn’t everything carry Vat except essential foods & kids clothing? If Uber has been trading in the UK for over 4 years surely this should have been identified before now. I guess what I’m saying is, unless you can prove Uber has been charging prices in line with other similar services that did include Vat then, rightly or wrongly, they’ve not collected any Vat to pay (assuming their prices are 20% lower than competitors), and that’s not necessarily their fault (and yes I can hear you saying ignorance is not an excuse to break the law).
Sounds like another sweetheart deal a lady vodaphone
This seems to be highly tangential and far-fetched.
Interesting claim – that an Employment Tribunal is determinative as to VAT liability. Even as a non-Tax-Specialist-QC, I would suggest that is probable nonsense.
The statement by the ECJ bod (“has said”) is an assertion, not a decision – unless you can supply a link to a decision.
Fine, there is the “but but but a Court dealing with other this has acknowledged that Uber supplies transport”. An interesting rhetorical point, but not much more. imo.
But can I now appeal my unfair sacking to the VAT Man?
Here we go again millions of pounds in unpaid tax let of yet the poor guy earning 20 grand a year under pays couple 100 quid will be persued relentlessly even to the point of bankruptcy yet these big company’s flaunt the same laws and buy another yacht
“An Employment Tribunal has decided that Uber is supplying transportation services.”
And employment law criteria and consequences are the same as those of tax law? Says who? How many lawyers have been brought low for not understanding that different branches of the law use the same words differently?
I’ve always run a business and been self employed for 30 years I can never understand why the hmrc always ruins me I’ve been bankrupt it is a complete rip off and going again through a bad time with owing hmrc money’s never easy this country out to ruin us.
What about Ltd company’s hgv drivers and self employed hgv drivers who paying little bit tax
Meg Hillier is certainly on the case.
Well you must have contacts in government,have them raise the questions during question time,a bigger audience is required for this matter.
I’ve read that Employment Tribunal judgement. You mention VAT more often in your blog than they did in their judgment.
Because they did not mention VAT once. Not once.
The Tribunal wasn’t about VAT, didn’t look at VAT and their judgement carries not a tiny iota of weight in VAT matters.
You’ve mentioned before the lack of education on tax among the general public. How does this help?
There must be far greater govt scrutiny & control of HMRC & it’s activities than at present. Revenue raising & expenditure is at the core of civil society & without due governance of this vital function civil society & it’s elected govt will collapse. It would appear that HMRC, desite its title, do not have due governance & oversight from parliamentary select committees HM treasury.
Even the discussion on this blog shows government to be way off course. If is is not SIMPLE, any law should be abolished. There are systems that could be implemented universally and SIMPLY.
Simplistic I know, but a universal tax on everything, including food, set at 15 % should cover the needs of all government forever. Imaging the squealing from all the above complexity merchants with no exceptions, no changes, deals, exceptions, arguments etc, to earn their fat livings off. Ah bliss.
In the majority of cases, VAT is a tax that is charged and passed on to HMRC. So if UBER never charged in first place then how can you even think they are liable?
The problem in UK PLC is we seem to need raise more and more tax instead of concentrating on the spending of that tax. Look at Public Sector pensions for a start!
There’s been a great attempt by HMRC using consultancy companies like Behavourial Insights Ltd, to whip up a frenzy to attack the self-employed, the very people who are wealth creators. HMRC need to focus on “Private Landlord” tax abuses instead of workers who are trying to earn a living.
Uber suppliers a popular services and individuals like the choice of using them, we need to stop attacking the “gig-economy”.
Just a small VAT point for a couple of those who have commented. A trader who makes taxable supplies in excess of the VAT threshold but fails to “register” for VAT is in fact charging VAT from the date he should have been, but has “failed to notify” that he is liable to be registered and account for the VAT element of his takings. He has also failed to increase his prices to reflect the VAT but in VAT law that is his problem. In other words (as I tell my delegates) it is not possible to forget to charge VAT; if you should have charged it then the law says that you did.
As a VAT lecturer I must say I don’t disagree with the analysis. VAT is in essence a simple tax (honestly!) in that if a taxable person makes a taxable supply attracting a positive rate of VAT then that person is liable to account to HMRC for the output tax charged. If UBER is held to be making supplies of transport services that is a taxable supply, liable at the standard rate (given the limited seating capacity of their vehicles). Making supplies of the value they are, there is no doubt that they exceed the VAT limit, and the services are supplied where the transport takes place. I can’t immediately see a problem with that logic. The court did not comment on VAT as that was not the matter before it.
Why would the HMRC allow UBER to get away with not paying it’s Tax liability? When it chases all claims against ordinary people. Even when they’re wrong and enforce payment back to the government purse. Then in ten to fifteen years later admit that they are due a rebate. But then again with all government departments cutting down on humans to do the work and relying on computers to do all. We stand no chance of winning the fight for justice or even the right to work.
Why should they pay VAT? They are acting as an agent for the driver partners. The driver partners are responsible for collecting and paying VAT.
Is it possible that a driver can be a worker for Uber and a supplier of services to passengers?
I appreciate that they would usually be mutually exclusive.
But might it be that Uber drivers perform the core transport service for passengers, but still nonetheless “work” for Uber, not because Uber directly provides the transportation service, but because Uber has an interest in ensuring that its agency app works properly and that its reputation (!) as a reliable agent is maintained?
That would suggest the service they supply to Uber is branding. And (with respect) that’s just not consonant with reality…
It’s not my view, just trying to explore what Uber may argue.
Is it really just branding? Uber may say that they are fundamentally a mechanism to link punters with drivers. But, if it can help it, an agent won’t work with any old principal. They’ll want to make sure that their principals have modern, clean cars, that they won’t rip off passengers by taking bad routes, and that there will be sufficient principals available in an area when required. Is it arguable that these are things that a prudent agent (albeit one with abnormal bargaining power) might wish to engineer for the sake of the success of their agency business? Their agency business would suggest if they didn’t. If so, they might require a level of control which amounts to worker status but might it nonetheless not affect the classic driver-passenger transaction?
Would not the same analogy apply to say an estate agent who operates a letting service for clients? They operate AML for clients and customers, decide which owners and which properties they want to take on (“brand image” for the agent); they advertise for customers, screen them (e.g. references, bank checks, even immigration checks); maybe operate the Deposit Protection Scheme); charge their fees, and so on. Does it make a difference that this is probably a one-off and time limited set of transactions, with a let property not relet for say 6 or 12 months?
It could only be corruption.
Reblogged this on discordion {Artist Ian Pritchard} and commented:
Something is very wrong at HMRC ( a blog by a QC)
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