Except, of course, you haven't. That's not how sovereign currencies work. Especially Sterling.
There is no direct connection between UK government spending (Supply) and taxation (Ways and Means). They are completely separate asynchronous processes from start to finish.
Having dealt with HMRC myself in topics from auth letters to paying vat every quarter... I'm not sure they exist*
* They probably do exist, as I got hold of someone on their helpline after 4 weeks of trying. That I got something else than I enquired about is another matter.
I’ve had to speak to HMRC quite a lot in the past couple years regarding VAT and PAYE issues and I almost always get through to a knowledgable and helpful person.
The waiting time on hold seems to have gone up since covid though. The last few times I’ve called the wait has been between 30 minutes and an hour when before covid the wait was normally less than five minutes.
I did once speak to someone that was quite hostile and unhelpful but after I finished the call I immediately called back and the person who picked up the phone was much more helpful.
However whenever I’ve had to call for personal matters it’s been a bit more hit and miss.
Last time I had to contact HMRC involved a 5 hour wait in the call queue. However, the person who eventually answered was extremely helpful and understanding. Even gave a personal email address in case I needed to follow up.
>Until last year, Uber said this meant it didn't have to charge VAT. It was just the agent for its drivers. So - the argument went - don't look at Uber's £2.5bn of revenue... look at each driver's own small revenue. Too low for VAT.
Doesn't this come down to what entity actually issued the invoice? When a UK customer gets the invoice for a ride, is it issued by Uber or by the individual driver/transport company?
Not sure about the UK, but in most jurisdictions they operate the invoice is coming from the driver/transport company, not Uber. My understanding is that any fees or comission that Uber collects are handled in the background between Uber and the driver/transport company.
> Doesn't this come down to what entity actually issued the invoice?
The way a value added tax works is the company that issues the invoice owes tax on its own markup.
In normal circumstances, this means the company that issues the invoice charges 20% on the full amount of the product, and their suppliers charge 20% on their invoices, with the first company paying the VAT on those invoices to their suppliers and the difference to the HMRC (who also collect VAT from the suppliers)
Uber's argument was "hey, we only owe HMRC for our markup, but these drivers supplying taxi services [probably] don't earn enough to owe VAT either, so we won't add VAT to our payments to them and can lower the overall bill to our end customers.
in 2021[1] a Supreme Court ruled that their drivers are employees (and not self-employed people), so I suspect the invoice shall be coming from the company. Perhaps that's also why HMRC is pursuing the VAT for the past year or two.
The court found they were "workers" rather than employees. It's a sort of half-way status in English employment law for people who are neither employees nor self-employed. It provides some, but not all, of the rights of employment. Most relevant here, it guarantees minimum wage.
Uber pays tax. HMRC are doing their thing and exploiting the complexity of the UK tax system to raise more government revenue.
This type of thing happens all the time. In the UK you can work as an independent contractor for years then one day HMRC will randomly decide to make a case that you're were actually an employee the whole time and should have been paying a significantly higher rate of tax.
The UK tax system is not explicit and open to interpretation so these disputes happen all the time if HMRC sees an opportunity. Given government spending is out of control and raising taxes doesn't win political points the complexity and interpretability of the UK tax system is now frequently being used as a weapon against UK citizens and businesses to increase government revenue.
Uber paid their taxes as they understood UK tax law. Not legally complying with their UK tax liabilities as you suggest would obviously be insane. The issue here is that the tax system is designed to be exploited. At least in my opinion. People disagree with me though and believe that the complexity and interpretability of the tax system is done in good faith.
> This type of thing happens all the time. In the UK you can work as an independent contractor for years then one day HMRC will randomly decide to make a case that you're were actually an employee the whole time and should have been paying a significantly higher rate of tax.
I assume you're referring to the IR35 laws - which were brought in specifically to combat a form of tax avoidance by highly paid contractors on long-term projects, who functioned exactly like employees (by being a contractor instead of an employee you could save a whole bunch of tax in the UK).
Yes, IR35 is a complicated pain - but everyone and their dog in the UK tech scene knows that contracting is/was the way to pay less tax. So it makes sense that HMRC is attempting to close the loophole.
> Uber paid their taxes as they understood UK tax law.
They were specifically attempting to use a loophole to avoid paying VAT the standard way (by claiming they're a "Tour Operator"). They've already lost multiple cases around the world for doing similar bad-faith interpretations of laws - so I think in this case it's Uber doing the exploiting.
The concern of tax rules being unclear and causing confusion and distress is a real concern, but that's off topic.
Uber willfully misunderstood tax law to their advantage. Were most other taxi companies charging VAT as tour operator even before Uber started? If so, you would be right that this a concern of unclear rules and arbitrary application of them...
I think the idea that HMRC (who have a limited enforcement budget and were pressured into taking this action by outside campaigners) is the one exploiting the tax system and corporations that spend vast sums of money coming up with creative reinterpretations of terms to dramatically increase their post tax profitability are merely bemused by its complexity is an odd take. Particularly when the company in question is notorious for creative reinterpretation of or plain ignoring regulations inconvenient to it.
VAT isn't a particularly complicated tax. This dispute relates to the fact Uber tried and failed to convince UK courts that its drivers were self employed under UK law so it lost its grounds for only owing VAT on commissions.
(afaik they hadn't provided any mechanism to pay VAT invoices to the minority of drivers with self-employment earnings over the VAT threshold, so it's difficult to argue they were doing their level best to comply with VAT law under the "self employed contractor" model anyway)
IR35, which you are referring to, is an absolute fucking nightmare for independent consultants. And lately “Managed Services Company” legislation seems to be their new attack vector.
However VAT is generally pretty clear, and we know Uber skirt every law and tax liability they possibly can. Looks like it’s time to pay the piper…
the best thing i learned from a seasoned professional serial entrepreneur, was that the only way people create successful businesses is by flouting or finding loopholes in taxes
Uber will be fine. The HMRC is pretty disfunctional, and usually chases contractors and their IR35 status. Easier to intimidate actual honest, hard working people, than a large corpo. A pathetic institution.
They can probably keep the amount as asset on the balance sheet until court decision (at which point liability will be created if they lose). Instead of having it in the "cash in bank" account it moves to "cash at HMRC" account, or something like that.
Readit News
[1] https://www.lbc.co.uk/news/350m-brexit-bus-nhs-social-care-p...
There is no direct connection between UK government spending (Supply) and taxation (Ways and Means). They are completely separate asynchronous processes from start to finish.
[1]: https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-u...
* They probably do exist, as I got hold of someone on their helpline after 4 weeks of trying. That I got something else than I enquired about is another matter.
The waiting time on hold seems to have gone up since covid though. The last few times I’ve called the wait has been between 30 minutes and an hour when before covid the wait was normally less than five minutes.
I did once speak to someone that was quite hostile and unhelpful but after I finished the call I immediately called back and the person who picked up the phone was much more helpful.
However whenever I’ve had to call for personal matters it’s been a bit more hit and miss.
>Until last year, Uber said this meant it didn't have to charge VAT. It was just the agent for its drivers. So - the argument went - don't look at Uber's £2.5bn of revenue... look at each driver's own small revenue. Too low for VAT.
Doesn't this come down to what entity actually issued the invoice? When a UK customer gets the invoice for a ride, is it issued by Uber or by the individual driver/transport company?
Not sure about the UK, but in most jurisdictions they operate the invoice is coming from the driver/transport company, not Uber. My understanding is that any fees or comission that Uber collects are handled in the background between Uber and the driver/transport company.
The way a value added tax works is the company that issues the invoice owes tax on its own markup.
In normal circumstances, this means the company that issues the invoice charges 20% on the full amount of the product, and their suppliers charge 20% on their invoices, with the first company paying the VAT on those invoices to their suppliers and the difference to the HMRC (who also collect VAT from the suppliers)
Uber's argument was "hey, we only owe HMRC for our markup, but these drivers supplying taxi services [probably] don't earn enough to owe VAT either, so we won't add VAT to our payments to them and can lower the overall bill to our end customers.
[1] https://www.bbc.co.uk/news/business-56123668
“This supply falls under the Value Added Tax (Tour Operators) Order 1987.”
And it does look like I wasn’t charged VAT.
This type of thing happens all the time. In the UK you can work as an independent contractor for years then one day HMRC will randomly decide to make a case that you're were actually an employee the whole time and should have been paying a significantly higher rate of tax.
The UK tax system is not explicit and open to interpretation so these disputes happen all the time if HMRC sees an opportunity. Given government spending is out of control and raising taxes doesn't win political points the complexity and interpretability of the UK tax system is now frequently being used as a weapon against UK citizens and businesses to increase government revenue.
Uber paid their taxes as they understood UK tax law. Not legally complying with their UK tax liabilities as you suggest would obviously be insane. The issue here is that the tax system is designed to be exploited. At least in my opinion. People disagree with me though and believe that the complexity and interpretability of the tax system is done in good faith.
It's a mistake to think this just impacts businesses: https://www.qdoscontractor.com/ir35/gary-lineker-wins-ir35-b...
I assume you're referring to the IR35 laws - which were brought in specifically to combat a form of tax avoidance by highly paid contractors on long-term projects, who functioned exactly like employees (by being a contractor instead of an employee you could save a whole bunch of tax in the UK).
Yes, IR35 is a complicated pain - but everyone and their dog in the UK tech scene knows that contracting is/was the way to pay less tax. So it makes sense that HMRC is attempting to close the loophole.
> Uber paid their taxes as they understood UK tax law.
They were specifically attempting to use a loophole to avoid paying VAT the standard way (by claiming they're a "Tour Operator"). They've already lost multiple cases around the world for doing similar bad-faith interpretations of laws - so I think in this case it's Uber doing the exploiting.
Uber willfully misunderstood tax law to their advantage. Were most other taxi companies charging VAT as tour operator even before Uber started? If so, you would be right that this a concern of unclear rules and arbitrary application of them...
But that's not the case
https://www.accountingweb.co.uk/any-answers/should-taxi-firm...
> Given government spending is out of control
UK spending is barely above average for industrialised countries. After a decade of austerity, British people are getting poorer and poorer.
VAT isn't a particularly complicated tax. This dispute relates to the fact Uber tried and failed to convince UK courts that its drivers were self employed under UK law so it lost its grounds for only owing VAT on commissions. (afaik they hadn't provided any mechanism to pay VAT invoices to the minority of drivers with self-employment earnings over the VAT threshold, so it's difficult to argue they were doing their level best to comply with VAT law under the "self employed contractor" model anyway)
However VAT is generally pretty clear, and we know Uber skirt every law and tax liability they possibly can. Looks like it’s time to pay the piper…
Credit: cost of sales
Or you could just account for VAT properly in the first place like 99% of businesses manage to.