At present, tax is only paid on the commission paid to companies like Uber by their drivers – a figure that equates to a fraction of the total passenger bill.
Now, Uber is redefining the legal relationship with its drivers by shifting the VAT liability.
Described as an “agency” model, Uber’s new terms effectively see the app acts as a type of booking agent.
The premise will see drivers effectively drawing up contracts directly with passengers, rather than through Uber, making them liable for the VAT.
Uber has previously rolled out an ‘agency’ model – but later abandoned it in 2021 after a judge ruled it was not allowed in London.
However, it was later overruled by the Supreme Court, with the cab firm permitted to operate the ‘agency’ model outside of the capital.
The new contract is not set to apply in London, where the agency model is not allowed under Transport for London rules.
The new tax is set to raise around £700m a year to fill the ‘black hole’ in the public finances.
The new contract also reveal that the company has the right to take a commission of up to a whopping 49 per cent on fares.
Uber told The Telegraph in a statement that it was making the changes in a bid to keep its fares affordable.
A Treasury spokesman said: “Ending this use of a niche tax scheme by online minicab firms will both benefit everyday cabbies with a fairer tax system and raise money to help deliver the country’s priorities – cutting the cost of living, cutting waiting lists and cutting debt and borrowing.”
