Uber fares to rise from today
Uber customers face inflated fares from today onwards after a court case forced the ride hailing app to add VAT of 20% to fares.
The court case was several months ago but the tax change took effect from 23.59 yesterday. This means passengers riding from today will see higher fares – although it’s unlikely that the whole 20% rise will be passed on to customers.
The move follows on from a court case last year that ruled that Uber workers were workers as opposed to being self-employed. The move meant drivers are entitled to holiday pay and pension contributions – but it also impacts the way they are taxed.
Until the court case, Uber’s view was that the actual transport service was provided by the driver to the customer, with Uber merely the agent bringing the two parties together. As a result, it only charged VAT on the commission it received from the driver.
Uber drivers were obliged to treat the entire fare as their own income for VAT purposes – but most drivers won’t be registered for VAT as their annual income is likely to be under the VAT limit of £85,000. That meant most Uber fares have historically been VAT-free.
But as well as defining drivers as employees, the Supreme Court ruling last year also reclassified them for VAT purposes.
While a self-employed person must keep track of their turnover and charge VAT once they are over the registration threshold, an employee or worker can’t register for VAT. So once Uber’s drivers were treated as workers, all their VAT responsibilities were effectively passed to Uber.
An Uber spokesperson said: “We have completed the changes to our business model as required by law. Other operators in London are also required to make changes to their models to comply with the relevant law.
“Uber operates in an intensely competitive market and we are committed to always offering consumers affordable prices. As always, riders will get a trip price before booking their journey.”
Other ride-hailing services will also have to comply with the tax change, with fares likely to rise across the board.
The move will be a blow to Uber passengers who saw prices hiked in November last year due to the company trying to lure more drivers.