Uber fares could go up by 20% if it loses a UK court battle from Ayman's blog

Uber drivers

Your cheap Uber ride might cost 20% more if the company loses a legal battle over taxes in the UK.

Jolyon Maugham QC is a respected barrister who is suing Uber through his non-profit, the Good Law Project, for alleged unpaid VAT.

In a case update, the Good Law Project estimated that Uber will have to charge passengers more, cut drivers` fees, or reduce its own cut of fares if the company loses the case.

In a press statement, the Good Law Project said: "The consequences for Uber`s business model are profound. Going forward, it may have to raise its prices by as much as 20%, reduce the wages it pays to drivers, or charge a smaller fee.

"It will also be forced to hand over a percentage of all UK fare income for the last four years to HMRC. Because VAT is an EU tax, Uber`s businesses in other countries will also be affected."

Jolyon Maugham

The thinking is that Uber can currently afford to undercut rivals and give you cheaper fares because it doesn`t pay as much tax as it should. And since it claims drivers are all self-employed, it doesn`t need to pay costs like national insurance. It also claims it it isn`t a transportation service provider, and therefore isn`t liable to pay VAT. T

That might all change.

Maugham has just sent a letter before action to Uber, which is a precursor to formally recovering a debt through legal means.

The debt, in this case, is a VAT receipt for one of Maugham`s Uber journeys.

If Uber is "compelled" to provide a VAT receipt, it is then liable to pay VAT to the UK`s tax authority HMRC.

Maugham`s argument hinges on Uber losing an employment tribunal in the UK last year. The tribunal ruled that Uber`s UK workers were entitled to minimum wage, among other benefits. It also held that Uber was a transportation service, saying: "It is unreal to deny Uber is in a business as a supplier of transportation services." And if Uber is a transportation service, then it`s liable for VAT.

Maugham calculated that Uber owes at least £20 million in unpaid tax, and said he`ll take Uber to the UK High Court in April.

An Uber spokesman said: "Drivers who use the Uber app are subject to the same VAT laws as any other transportation provider in the UK."

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