As the BBC has just reported:
Ride hailing taxi app firm Uber must classify its drivers as workers rather than self-employed, the UK's Supreme Court has ruled.
This means tens of thousands of Uber drivers are entitled to minimum wage and holiday pay.
The binding decision could leave Uber facing a hefty compensation bill, plus wider consequences for the gig economy.
Daniel Barnett, an employment barrister, has said on an email that:
This means that Uber drivers are entitled to claim minimum wage (including backpay for minimum wage), with their minimum wage claims being based upon their entire working day, not just when they had a rider in their cabs. Up to two years' backpay (there is some doubt about this, it could be longer), or £25,000 (whichever is the larger) can be claimed in an employment tribunal, and up to six years' backpay can be claimed in the county court.
They can also claim 5.6 weeks' paid annual leave each year, and will have whistleblowing and similar rights. This judgment does not give them ‘employee' rights, such as the right to a redundancy payment or to claim unfair dismissal.
Crucially, the decision looked at the facts of the relationship between Uber drivers and not their documentation and said the facts led to this conclusion, as I have always been convinced it should.
There are a number of points to consider as a result. First, as the drivers working for Uber are not self-employed the entire statement of their tax liabilities for the last few years has been wrong. Uber will now be expected to make good this situation. The tax bill will be significant.
Second, I have no doubt that many Uber drivers will now be seeking minimum wage payments plus holiday pay. Again, the settlement is going to be expensive.
But, third, and most likely the most expensive of all, is the fact that this shatters the claim that Uber has made that there is no contract between a customer and Uber when a customer travels in a Uber car. Uber has instead claimed that the contract is with the driver. However, if the driver is a Uber employee that becomes a meaningless claim. The consequences is that VAT will now be owing on the turnover of Uber, when that has not been settled to date.
I well remember discussing this last issue with Jolyon Maugham some years ago, and before he brought his claim against Uber for a VAT receipt for a journey made, with the precise aim of forcing this issue into the open. Now the issue is unavoidable. HMRC has long resisted taking action against Uber, but now it must.
Can the ride hailing firm survive so many charges as a result of one legal decision? I would suggest that must be open to doubt because its entire business model looks to be blown apart to me, based as it was upon tax avoidance that has now been shown to not work.
The very survival of Uber in the UK must now be in doubt, and with it large parts of the gig economy. A serious review of how we get tax, employment and VAT right in this economy is now well overdue, not just to ensure that the right amount of tax is collected, but to also protect all those who work in it. As a result this decision is very welcome.
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I stead fastly refuse to install the Uber app as a point of principle because of their dubious ways.It sounds like it’s gone the other way in California.
Hear hear,
As a small employer myself, I resent the likes of Uber getting away with this farcical position that they owe nothing to nobody, ever. They are not the only ones but a high profile case like this hopefully will lead the way to an end of the so called gig economy.
We live in hope – but may be waiting a long time before HMRC gets this thing moving. Good Law project will be busy for quite some time. Gov’t will not want it as will upset a US company and impact that wonderful trade deal that is just on the horizon….
This is indeed welcome news – really well done to all concerned. And… I hope might have implications further afield, such as in the disgraceful way that HEI’s treat casualised staff (though to be fair, I don’t believe they tried to treat staff as poorly as Uber, not quite as poorly)
Designation as a “worker” for the purpose of applying certain provisions of employment law does not necessarily mean that the person is an employee for income tax and NICs purposes. It might , but tax status was not decided in the case as far as I can see.
As I understand it, the case was not that the drivers were engaged under a “contract of employment” within paragraph (a) of section 230(3) of the Employment Rights Act 1996, but rather within the wider category of people who are not employees but are engaged under “any other contract … whereby the individual undertakes to do or perform personally any work or services for another party to the contract” within paragraph (b) of that section.
Presumably HMRC has looked at this before, and the VAT position too, and decided against taking action. Have the facts or the law changed?
But it certainly will mean significant claims for minimum wage and holiday pay.
I think it means all three…..
The VAT case is under review
I cannot see how the PAYE regs could not apply using current HMRC interpretations
Is it a sustainable business model ?
If so it can obviously pay its way by paying appropriate labour costs
Otherwise it”s just a scam
If it can’t fulfil its legal obligations’ it shouldn’t be in business
A just and fair result in my opinion.
Has it kept the necessary records of drivers earnings and made them available to HMRC?
I am inclined to suspect the liability will fall on a UK company with extremely limited assets. That company could be forced into bankruptcy, at which point another company in the Uber structure which owns all the intellectual property will simply license it to a new UK subsidiary.
Uber will already be dusting off the argument that this case relates to what happened prior to 2016, that they changed their working practices 5 years ago and consequently this ruling makes no difference to what has taken place over the past 5 years.
In addition to that there will be a whole raft of arguments about the 5 year old tax returns and whether a tax inspector at HMRC could have been reasonably aware of these potential issues when the tax returns were filed and whether they are now closed as a consequence.
This is entirely possible, I agree
The question as to whether this would be fraudulent would, however, have to be considered because a liquidation would be involved
The VAT issue remains live, come what may. This would be a continuing trade, without a doubt: VAT rules cover assumption of liabilities in that case.
Sorry, for us non accountants what does this issue about VAT & continuing trade mean?
…..The VAT issue remains live, come what may. This would be a continuing trade, without a doubt: VAT rules cover assumption of liabilities in that case…………….
John
There are laws surrounding business succession in VAT
If one person takes over a business previously operated by another person the VAT can be related and transferred as a continuing obligation between the two businesses, although legally separate, meaning the liability can be attached to the new activity.
I stress, can be
But it would certainly create problems for Uber if it tried to dissolve a company with a massive VAT bill in it and start the next day with a new company. Wage claims, PAYE due and other claims might die with the old company. But VAT? I am not so sure.
Richard
“There are laws surrounding business succession in VAT
If one person takes over a business previously operated by another person the VAT can be related and transferred as a continuing obligation between the two businesses, although legally separate, meaning the liability can be attached to the new activity.”
Interesting, Richard. Where is the legislation to be found on this?
Pass….
It’s years since I looked this up, to be candid
But I am aware that the question is still asked on new registrations so I presume it is still relevant
I think there is also a 4 year time limit on VAT, except in the case of deliberate errors.
The big question would really be whether HMRC did anything to protect that claim for VAT?
Deliberate has a more narrow definition than in normal English. In general terms it would largely hinge upon whether they Uber knew they were going to lose this case 5 years ago when they filed the return.
HMTC has been protecting the claim for more than two years, as I understand it
But I may be wrong
This govt will change the law retrospectively.
I very much doubt it
You ought to see the comments section to the story in zerohedge…..I think they’re going to send the US marines in to sort-out the court, probably after a strategic nuclear attack….
I saw CapX
Utterly bizarre….
Looking at the judgement, it related to UBER in 2018.
I think they’ve changed much of their modus operendi now in anticipation.
That won’t change the VAT argument, I suggest
Not retrospectively. But. I believe that the raft, galleon even, of Laws they have gifted themselves, ministers and unelected ‘ministers’ over the last 12 months, under cover of deliberate Covid excessive deaths, will be used in many such future instances.
They were designed exactly for such purposes. I’m sure some reasonable excuse of a vital Trade Deal is already cooked up. Some other judges may even be persuaded to reverse the decision in the meantime.
Never used Uber in the U.K.
Had to for a few days in a Indian city 5 years ago, it was the only way of getting a taxi within minutes. I always gave a good tip.
I have never used one
Some other judges cannot be persuaded to reverse the decision. It is a Supreme Court decision. That’s it, it is final.
With regard to a dead company’s debts (except VAT) dying with it, wage claims, holiday pay, PAYE etc, that would not be the case if there had been illegal activity by the directors. They would become personally liable.
True, they could be
But there I no way they could afford these
And their defence would be that they had been legally advised that they were not due and that is why they had gone to court. That would work unless it could be shown that they knew otherwise
A great win for all uber drivers and could not have happened if some drivers had not joined GMB union. I hope that this encourages people to join a union because relying on big business or politicians to look after working conditions is not effective.
Personally I’d like something like this happen for music and musicians and composers.
The internet gets away with murder when it comes to undervaluing music in my view.
The situation is that Uber drivers, (whether they realise it or not), are just turkeys waiting for Christmas. Uber, as an IP/Services firm, don’t care one jot about how the drivers might be classified. The endpoint is holding the bulk of the market when autonomous cars are authorised. If they are forced through multiple lawsuits and pay limited damages or recompense to drivers, then fair enough. Ultimately, at the point where the use of autonomous cars is approved in the main markets, the Uber drivers will quickly find themselves as ex-Uber drivers as it will be to the advantage of the company to operate their own electric cars/maintenance systems and so forth. I’ve never beem convinced that the Uber drivers who are fighting for their employee rights have been aware of the longer-term situation but it is pretty obvious to an outside observer.
Anybody who has seen the movied Total Recall should know that “Johnny Cab” is what the likes of Uber are expecting in the near future. Without the gargoyle pretending to operate the car in the front seat, of course.
I’m not averse to the end goal as car sharing/pooling is obviously a better outcome for the planet. The issue is that it should be a public transportation service operating the service to ensure the most effective use of resources overall.
It looks to me like their business model, along with a number of other companies who rely on so-called self-employed workers, often hired via sub-sub contractors, is based on something very close to tax evasion. I would slap an exemplary fine on them as well, based on turnover.
I heard the Minister say they want to protect workers’ rights (lol), well it’s time someone did, for since Thatcher and Blair workers’ rights have been eviscerated and Unions which fought to protect those rights have been emasculated.
Now where is Labour on this, or anything else for that matter to do with social justice, a party that used to be socialist?
I am nit convinced this is evasion
It does smack of avoidance
Of course the downside for Uber drivers is that Uber can decide when they work and not let the driver decide when they want to clock in and clock off. If there are too many drivers wanting to work then Uber can prevent them. If Uber want more cars on the street they can compel drivers to work or the driver is in breach of their employment contract. A fair number of current Uber drivers will become unemployed. Ride costs will increase to cover the inevitable vat charges and increased employment costs and availability will fall. Uber only really makes money from the major cities so they will probably back out from smaller cities and leave those to the existing mini cab companies. The number of drivers currently earning something from using Uber will fall. This is not necessarily a clear cut win for worker or consumer. There might be some extra tax collected but that as we know doesn’t pay for anything but regulates the currency in the system.
But tax delivers equality and level,p,aging fields to uphold the values of society. Please don’t use MMT as an excuse to forget social justice.
My perspective on VAT: provided Uber 2 Ltd does not take over Uber Ltd VAT number (which it doesn’t have to do) then nor does it take the VAT liability. other may know otherwise?
BUT would Uber 2 be guilty of Phoenixing?
it would be good, wouldn’t it, if Insolvency Service actually followed through on phoenix companies.
Instead of HMRC having to waste person-years investigating firms with dodgy business practices let’s introduce “strict liability” so that the smart alec companies who come up with clever wheezes to circumvent taxation law, employment law etc have to prove that their model is lawful.