Good Law Project Limited v Uber: A Briefing
This is a briefing note for journalists in advance of the decision of Mrs Justice Lieven in R (oao Good Law Project) v HMRC (Interested Party: Uber London Limited) (the “Decision”).
The Decision is in relation to a preliminary question, namely, whether HMRC can tell Good Law Project if it has assessed Uber (HMRC and Good Law Project say yes but Uber says no) and whether, if HMRC can, Good Law Project should be subject to a penal notice to prevent onward disclosure (Good Law Project says no and Uber says yes) (the “Issue”).
The issue arises in the context of a judicial review claim brought by Good Law Project against HMRC for its failure to raise assessments – formal demands for tax – against Uber London Limited (“Uber”) in respect of what Good Law Project says is Uber’s VAT liability. The Claim (which can be seen here) was filed in May 2019 following an exchange of correspondence between Good Law Project (our letter) and HMRC (its letter in response).
If – as expected – Mrs Justice Lieven decides against Uber, Uber has indicated it is likely to appeal the decision.
Have HMRC assessed Uber?
The first point to note is that it is now reasonably clear that, following Good Law Project’s decision to issue the judicial review against HMRC, HMRC has assessed Uber to VAT:
- HMRC’s position in April 2019, as disclosed by its letter, was that it was “not yet in a position to reach a firm conclusion as to the VAT implications of Uber’s business model” and it would be inappropriate to tell Good Law Project its view as to Uber’s tax liability “particularly before that view had been notified to that party and it had had the opportunity of responding.” That HMRC had not then issued a VAT assessment is also clear from: (a) this exchange between the Public Accounts Committee and senior HMRC Executives (from Question 88); and (b) this sworn witness statement from a senior Uber executive.
- That the position has now changed is clear from the following. When Good Law Project began its judicial review proceedings, the publicly stated position of Uber Technologies, Inc (the US parent of Uber) in its filings to the Securities and Exchange Commission was: “Losing the [Aslam case in which drivers assert an entitlement to workers’ rights] may lead the UK tax regulator (HMRC) to classify us as a transportation provider, requiring us to pay VAT (20%) on Gross Bookings both retroactively and prospectively.” However, after the Good Law Project judicial review was initiated, Uber Technologies, Inc, in August 2019, changed its position in its SEC filings. It now says: “the Company is involved in a proceeding in the UK involving HMRC, the tax regulator in the UK, which is seeking to classify the Company as a transportation provider.”
- This is also borne out by the Skeleton Arguments of the Parties in the judicial review claim. HMRC’s Skeleton says it wants only to “disclose to GLP information regarding HMRC’s position in relation to ULL, limited to whether at the date of such disclosure there has been a decision to assess or a decision not to assess ULL for any particular prescribed accounting period”. Uber relied in its Skeleton (see paragraph 9) on the passage from HMRC’s letter (see the first bullet above) which said it was objectionable to tell Good Law Project whether it had been assessed “particularly before that view had been notified to that party and it had had the opportunity of responding.” In the oral hearing, Mrs Justice Lieven put to HMRC that matters had “moved on” and HMRC’s Counsel agreed.
How much is the assessment for?
We can extrapolate the rough size of the assessment from figures provided by Uber in 2017. It looks to be substantially in excess of £1bn – and we would expect it to be £1.5bn. In October 2017 it had 50,000 drivers earning £15 per hour after the service fee (which is 25%) and they worked an average of just under 30 hours a week.
So Uber’s UK market size was 50,000 x 20 (ie such sum net of a 25% service fee as gives you 15) x 30 x 52 weeks = £1,560,000,000
If that sum is VAT inclusive then the VAT is £260m per annum x four (being the number of years HMRC can ‘go back’) = £1,040m. And to this sum will need to be added interest giving a total of over £1.1bn (assuming no growth in market since 2017).
What happens going forward?
As matters stand, assuming it is right to say Uber has been assessed to VAT the following consequences follow:
- Uber is not presently collecting VAT from customers so is accruing a liability to HMRC of 17% of all UK revenues – or (assuming its market has not grown since 2017) £20m per month;
- that 17% will need to be borne by or by a combination of drivers, Uber and passengers with knock on effects for its business model.