Uber has swerved paying hundreds of thousands of kilos to the UK exchequer below Rachel Reeves’s new “taxi tax” after the ride-hailing app rewrote contracts with its drivers.
The transfer got here as guidelines introduced in November’s finances took impact, which adjusted how VAT is payable on minicab fares and would have resulted in the entire Uber fare turning into topic to the 20% gross sales tax.
In November, Reeves informed the Commons the modifications would find yourself “defending round £700m of tax income annually”.
Nonetheless, up to date phrases issued to Uber drivers from January 2026 imply the expertise agency will act as an agent, slightly than because the provider, of transport providers exterior London. The transfer means drivers make a contract instantly with their passengers – so they have to cost any VAT due on the fare, whereas Uber solely provides VAT to its fee.
As most drivers are usually not regarded as making greater than £90,000 in bookings a 12 months, and due to this fact do not need to cost VAT, the vast majority of Uber fares exterior London will keep away from turning into dearer, because the 20% gross sales tax is not going to apply.
The brand new contracts don’t relate to London, the place the company mannequin is just not allowed below Transport for London guidelines. Because of this, Uber passengers within the capital pays VAT on their fares.
Uber’s change to the phrases with its drivers has been anticipated because the finances announcement.
On the time, Andrew Brem, Uber’s regional common supervisor for the UK, stated: “The federal government’s motion at the moment to vary the foundations will imply increased costs for passengers in London, and fewer work for drivers, when persons are already fighting the price of residing … This determination additionally establishes the absurd scenario the place a visit in London will likely be taxed at a distinct fee than a visit wherever else within the UK.”
An HM Treasury spokesperson stated: “Ending this use of a distinct segment tax scheme by on-line minicab companies will each profit on a regular basis cabbies with a fairer tax system and lift cash to assist ship the nation’s priorities – reducing the price of residing, reducing ready lists, and reducing debt and borrowing.”
It didn’t say if Uber’s modifications would have an effect on its estimate of “defending” £700m a 12 months of receipts from the brand new coverage.
