Can Uber afford its tax and wages bills?

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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.