Uber must pay all of its taxes

by Good Law Project Limited

Uber must pay all of its taxes

by Good Law Project Limited
Good Law Project Limited
My name is Jo Maugham QC. I direct the Good Law Project Limited which uses the law to deliver a progressive society.
Funded
on 31st March 2017
£107,650
pledged by 3394 people
Good Law Project Limited
My name is Jo Maugham QC. I direct the Good Law Project Limited which uses the law to deliver a progressive society.

Uber Case Update

Sept. 26, 2017

The claim we asked you to fund

The claim we asked you to fund is progressing.

Back in June, very shortly after we completed our fundraising, we filed our Statement of Claim in the High Court. That claim was drafted by a QC and a Junior. We also filed a request for costs protection: we continue to believe that we will win but, as we explained here, we also have to address the fact that, if we lose...

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Uber, like everyone else, must pay the right amount of tax.

Last year the Employment Tribunal held that Uber was supplying transportation services. If Uber is supplying transportation services, it should be charging 20% VAT on all its fares and paying that money over to HMRC: tens or hundreds of millions of pounds every year. But it wasn't last year and it isn't now. And if Uber is liable to VAT it will also owe substantial amounts of unpaid VAT from the past - both to HMRC and to other tax authorities throughout the EU. 

There is a public interest in ensuring that, in particular, big and powerful taxpayers pay the tax they owe. If we don't believe others are made to pay their taxes it undermines our willingness to pay ours. Why would we if we think they don't? 

There is also a perception that HMRC has one rule for big corporations and another rule for everyone else. 

We don't know much about the private conversations that take place between HMRC and the most powerful taxpayers. Neither side wants us to. But from what we can see it looks as though the amounts of tax that Google and Apple pay in the UK are unaccountably lower than what they pay in smaller markets on the Continent. We know that the French Finance Minister accused HMRC of doing a sweetheart deal with Google. We know HMRC brings thousands of prosecutions of the poor who over-claim benefits but has, historically, been enormously reluctant to prosecute the wealthy who evade tax offshore. We know HMRC ran semi-permanent tax amnesties on evaded foreign taxes that appalled a senior UK judge. We know HMRC went out of its way to provide political cover for the artificial tax planning arrangements adopted by the likes of Facebook and Amazon – even going so far as to excuse them as “not tax avoidance.”

These are reasonable grounds for public interest. But there’s no way of understanding what's going on. Call up HMRC and you’re told customer confidentiality means they can’t discuss the matter. The Public Accounts Committee has no greater luck. Politicians and senior HMRC executives do not seem to want meaningful change. And some taxpayers – or in many cases non-taxpayers – offer, instead of transparency, a cocktail of evasion and untruth.

All of this damages trust in Government and in the establishment. And, if you care about the future of our country, this should worry you hugely.

The Good Law Project has taken advice from a Queen's Counsel, George Peretz QC, and a junior, Brendan McGurk, both of whom practice in the field of VAT law. And it has instructed Edwin Coe LLP. We cannot disclose that advice but you can read why our Director, Jo Maugham QC, thinks Uber is liable to charge VAT here (https://waitingfortax.com/2016/12/20/thats-one-uber-vat-problem/).

Last week, our Director, Jo Maugham QC, took an Uber from his office to meet a client. The law gives him a right to a VAT receipt for that journey. But Uber can't give him a VAT receipt without accepting it is liable to charge VAT. And it says it isn't. And so Jo intends to sue Uber in the High Court to force it to give him his receipt. If he wins it is very difficult to see how Uber can avoid charging VAT on all Uber rides in the UK and, quite possibly, elsewhere throughout the EU.

It is impossible to know what the litigation will cost. It will depend upon what Uber says and what the High Court says. But our initial target of £75,000 will cover the bulk of our costs of bringing the case in the High Court. Our lawyers are all acting at considerably below market rate. But we are likely to need to raise a further sum both for additional legal expenses and to ensure that, because Jo Maugham has no private interest in the litigation, he is not personally exposed to the costs of losing.

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Uber Case Update

Sept. 26, 2017

The claim we asked you to fund

The claim we asked you to fund is progressing.

Back in June, very shortly after we completed our fundraising, we filed our Statement of Claim in the High Court. That claim was drafted by a QC and a Junior. We also filed a request for costs protection: we continue to believe that we will win but, as we explained here, we also have to address the fact that, if we lose, we will face a costs liability that could exceed £1m. We have addressed that possibility by asking the court to grant us costs protection and our application – for which we have engaged a different, specialist costs, QC – will be heard in November. Obviously we cannot control when the High Court has capacity to hear applications of this nature.

Just in case the court refuses the application it would be helpful to have an alternative claimant in reserve. If you know someone who is VAT registered, not wealthy, and is prepared to be a claimant please let us know. We can guarantee that person suffers no financial loss.

A new claim against Uber

In the meantime, we are, with no further funding, pursuing the same claim in a different way.

The basis for the original claim against Uber – the one you funded – is that Uber charged VAT on the fare for a taxi ride taken by our director, Jo Maugham. The consequence of our claim succeeding is that it must have charged VAT on all other Uber taxi rides – and that it must pay that VAT to HMRC, a bill which could easily exceed £1bn.

We are now also pursuing a different claim.

In our director, Jo Maugham’s, VAT return for the quarter ending 30 June he sought to recover the £1.06 of VAT on that fare. As he explained here, if HMRC allows him to recover that £1.06, it will be accepting that he has paid £1.06 input tax to Uber and, implicitly, that it has to collect that £1.06 from Uber. And if that is true for his £1.06 it will also be so for every other £1.06 Uber has ever charged.

And if HMRC decides to refuse his claim he could have the chance to appeal to the First-tier Tribunal (Tax Chamber) against that rejection and contend that, contrary to HMRC's decision, he has paid input tax to Uber. And if he won that appeal the Tax Chamber would be deciding that Uber had charged VAT and, implicitly, that it must pay that VAT to HMRC - along with all the other VAT Uber has charged its passengers.

In that appeal, Jo Maugham would be the Appellant, HMRC would be the Respondent and Uber would be grumbling in the back of the room. And, unlike in the High Court, in the Tax Chamber the loser doesn’t have to pay the winners’ costs.

In August, HMRC replied to Mr Maugham’s VAT Return asking for more information and he wrote back in the following terms:

"I write further to my letter of 30 June 2017 and your reply of 7 August 2017.

"In your reply you say you are presently unable to exercise your discretion under regulation 29(2) Value Added Tax Regulations 1995 but invite me to submit further evidence.

"I attach for your information a letter before action to Uber London Limited (“Uber”) dated 21 March 2017 together with Uber’s reply dated 3 April 2017.

"You will note from the correspondence that:

  • there is, and can be, no dispute about the fact of a supply of taxi services to me or the price I paid;
  • there is, and can be, no dispute that if the supply were made by Uber (a taxable person) the price paid includes an amount of input tax (corresponding to the amount of output tax for which Uber would on that basis be obliged to account for to HMRC); and
  • the reason why there is no VAT invoice recording VAT in the amount of £1.06 is simply that Uber denies that it has made a VATable supply: it says that it was its driver that made that supply.

"Given those facts (which are established by the evidence supplied with this letter and my letter of 30 June 2017) I can with respect see no basis for you to decline to exercise your discretion:

  • if you agree with Uber that the supply is made by the driver then the appropriate course is for you to raise an assessment against me under section 73(1) Value Added Tax Act 1994; and
  • if you agree with me that the supply is made by Uber then you ought to exercise your discretion to allow my claim for input tax.

"What would not be lawful would be for HMRC to leave this matter, and my tax liabilities, in limbo by declining to take, or unduly delaying, one or other of the above decisions.

"I await your further response."

We now wait to hear further from HMRC. When there is more news we will update you.

Further Update

June 26, 2017

So that you can see what has been going on with the Uber case I have posted here (1) a copy of our letter to Uber’s solicitors (2) a copy of our pleadings (3) a copy of the ‘Response pack’ (4) our application for costs protection (5) my witness statement supporting that application and (6) the exhibit to that witness statement.

Perhaps the most useful document to read is the witness statement. But the key point to note is that – as our Director indicated in a piece in The Badge – before we ask the Court to set a window for a hearing of our claim, we have to address the possibility of a costs liability which might top £1m even before any appeals. We hope that the judge will see the public interest in our claim but if she or he does not we may look for an alternative claimant who doesn’t have any material assets. Do let us know at info@goodlawproject.org if you are, or know, of such a person.

Thanks for your support,

Jo Maugham

Further Update

June 26, 2017

So that you can see what has been going on with the Uber case I have posted here (1) a copy of our letter to Uber’s solicitors (2) a copy of our pleadings (3) a copy of the ‘Response pack’ (4) our application for costs protection (5) my witness statement supporting that application and (6) the exhibit to that witness statement.

Perhaps the most useful document to read is the witness statement. But the key point to note is that – as our Director indicated in a piece in The Badge – before we ask the Court to set a window for a hearing of our claim, we have to address the possibility of a costs liability which might top £1m even before any appeals. We hope that the judge will see the public interest in our claim but if she or he does not we may look for an alternative claimant who doesn’t have any material assets. Do let us know at info@goodlawproject.org if you are, or know, of such a person.

Thanks for your support,

Jo Maugham

We have issued proceedings

May 26, 2017

Earlier this week we issued proceedings against Uber London Limited.

Those who funded the action will have noticed that there was a delay between the funds being collected and proceedings being issued. This was to address the question of costs in more detail.

Uber have instructed Herbert Smith Freehills (“HSF”) to act for them in the proceedings and HSF have written several letters stating that Uber will look to recover its costs from Good Law Project Director, Jo Maugham, if they lose. This is no small matter: it is perfectly possible that Uber’s costs of litigating the matter will reach £1m in the High Court alone. And, absent costs protection, that burden will fall on him personally.

Following that correspondence we took advice from a QC who specialises in costs. Having taken that advice we were able to issue proceedings. But we will need to resolve the costs issue early on in proceedings.

We appreciate that many of those who funded this case want to see it move forward quickly. Legally, we are on strong ground. Indeed, following the decision of the Advocate General we are on even stronger ground than we appreciated when the litigation was crowdfunded. And that is the most important point. However, it would be foolish to underestimate Uber’s desire to hold on to what could very easily be £1bn of tax it has avoided and interest on that tax.

We will, of course, keep you updated as matters progress.

The 'stretch' target

April 3, 2017

Thank you for your support. 

As you will have noticed we have now hit the initial fundraising target. This means we are in a position to commence proceedings against Uber. The legislation gives Uber a period of time to provide us with a VAT receipt - until the middle of this month - and this means we can't sue it until that period of time has run out. But we will not drag our heels. Last week - even before the fundraising target was hit - I asked the barrister team to start drafting the claim again Uber and I hope and expect we will be in a position to start proceedings against them in the High Court before the end of the month.

Some people have asked why the funding target has been raised. 

If you read the original listing it explains that it is very difficult to work out how much a case like this will cost and it points out that £75k is unlikely to be enough. I also said this on twitter a number of times whilst we were raising the £75k. And although £75k is a lot of money, remember, the case could well be worth billions of pounds to Uber. 

Because the barristers and solicitors are working at low rates, I think £75k will take us most but not all of the way. If we don't hit the raised target I am likely to need to seek more crowdfunding later on. But we will still take the initial steps. Indeed, I cannot absolutely rule out the possibility that we will need to raise more money even if we do hit the raised target. But I will try very hard to avoid that possibility.

Yes, I could have asked for more money to start with - but sometimes people like to see how you spend the money they've given you before they give you more. And if you ask for too high a target you run the risk that you won't hit it and you won't be able to do anything. So I exercised my judgment.

In the meantime, you should make sure that your MP understands your frustration at the fact that it is you who is having to pay to challenge Uber's tax avoidance. You should ask him or her why HMRC isn't doing it.

Thanks, again, for your support. I know the money you pledged was hard earned.

Jo Maugham 



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