Exclusive: Loophole allows Uber to avoid UK tax, undercut rivals
By Tom Bergin
LONDON (Reuters) - Car service Uber is using a gap in EU and UK tax rules to avoid incurring sales tax on the booking fees it charges drivers in Britain, a practice a senior politician said was unfair to competitors and defied the intent of the law.
San Francisco-based Uber charges lower fares than rival ride hailing apps. In Britain, its competitors' fares include 20 percent value added tax (VAT) on booking fees, but Uber's fares do not.
Uber is able to avoid VAT by exploiting a loophole in how the tax is collected for business-to-business sales across EU borders, which arises because it treats its 40,000 UK drivers as separate businesses, each too small to register for VAT.
It confirmed to Reuters that it does not pay value added tax on the fees it charges British drivers. By contrast, two of its main UK rivals, Gett and mytaxi, both said they do pay VAT on their fees. They declined to comment on Uber's practice.
The loophole applies in other European countries too, but is particularly important for Uber in Britain which accounts for a third of its European business. Other EU countries have put tighter rules in place to close or narrow the loophole.
Paying VAT on Uber's fees would cost the company about 1,000 pounds a year on average for each of its UK drivers, based on information Uber has given about the size of its British business, which is growing rapidly under its expansion plans.
Uber told Reuters it respected the tax rules in all the countries where it operated. Asked whether avoiding paying value added tax gave the company an unfair advantage over its rivals, a spokesman said: "The same rules apply to any international service provider with customers in the UK."
Her Majesty’s Revenue and Customs (HMRC), the UK tax authority, declined to comment on Uber, citing confidentiality rules. A spokesman said: "Everyone has to pay the tax due under the law and we make sure they do." Continued...