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Case update 20 March 2017

Go after Uber? If HMRC won’t, we will

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Funny transactions to dodge tax on bonuses were all the fashion back then. Goldman Sachs wanted to hand out bonuses but was less keen to hand over the taxman’s share. So it set off on what the professionals call ‘tax mitigation’. But the mitigation didn’t mitigate and in 2010 Goldmans settled its liability with HMRC. And settled it rather well: it was, as a High Court Judge put it, “not a glorious episode in the history of the Revenue.”

The episode fed the popular perception that HMRC was in the habit of delivering sweetheart deals to the big boys. A perception HMRC recognised as damaging. It “accepted that there was a need to restore public confidence in the way in which we handle tax disputes.” And responded with:

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“a new post of Tax Assurance Commissioner, whose role is to ensure that Parliament and the public can have confidence in HMRC’s work, with an explicit challenge role to assess whether a proposed settlement secures the right tax efficiently and in so doing treats taxpayers even-handedly.”

Not much – but a start.

But HMRC has got complacent again. So for a period of time last year the job of reassuring the public that HMRC was fearlessly looking after the public interest was held by… HMRC’s own Executive Chairman.

But the public interest hasn’t gone away.

And, as there were back in 2010, there remain very good reasons why the public is right to be interested.

We know that HMRC does deals with Google and Apple that – compared with the tax liabilities charged to those companies on the Continent – look like sweetheart deals. We know that the French Finance Minister accused HMRC of doing sweetheart deals. We know HMRC brings thousands of prosecutions of the poor who over-claim benefits but has proven very reluctant to prosecute the wealthy who evade tax offshore. We know that HMRC has gone out of its way to provide political cover for the artificial arrangements adopted by the likes of Facebook and Amazon – going so far as to excuse them as “not tax avoidance.”

There’s no way of getting to the truth of these stories. If you call up HMRC you’re told that customer confidentiality means HMRC can’t discuss the matter. And the Public Accounts Committee has no greater luck. And what you’re given by the taxpayers – or non-taxpayers – themselves is often an ugly cocktail of evasion and untruth. And when our Director has talked to senior HMRC executives it is clear they don’t see any need for meaningful change. And they don’t want it.

And we know this stuff undermines people’s willingness to pay their own taxes: why should you if others won’t? But it’s more damaging than that. It tears at the fabric of society. It undermines the trust in our institutions – who are they at work for? And in our politicians who are easily portrayed as much too close to big business. It drives a desire for revolutionary change, for events like Trump and Brexit.

We have no particular axe to grind with Uber. The technology is fantastic – as anyone who uses it knows. We worry about how it undermines our public policy objectives: take disabled access as an example. If licensed taxis and Ubers are doing the same job but you only require licensed taxis to offer disabled access then you place licensed cabs at a competitive disadvantage. Over time, they will be driven out of the market and, then, where’s your public policy objective? But that’s an example of a regulatory deficiency and we can’t properly blame it on Uber.

But it should, like everyone else that wants to do business in the UK, comply with all of our laws. Indeed, Uber itself has said “We pay taxes in every country we operate in and comply with all local and international tax laws, this includes the UK.”

And it looks to us from the Employment Tribunal Decision that it should be charging VAT on the taxi services it supplies. Our Director, Jolyon Maugham QC, explains why here. And, to confirm our view, we’ve taken formal advice from a specialist QC. But it is our expectation that HMRC will find a way to justify to itself avoiding a VAT challenge to Uber.

And we don’t think it should. We think matters in which there is a genuine and legitimate public interest shouldn’t be resolved behind closed doors. We think the Government should be asking whether Uber has a liability to tax. And until we can feel confident that it is, and properly, we intend to look for challenges like the one we intend to bring against Uber.

We have taken formal advice from a specialist QC and served a letter before action upon Uber.