Taxi rides could go up by 20 per cent after ride hailing app Uber won a High Court ruling that will see rival apps face a 20 per cent VAT charge on profits.
The company brought the case following a 2021 decision by the UK Supreme Court, which ruled that Uber drivers were “workers” for Uber, which impacted the app’s tax status.
In a bid to level the playing field with competitors, Uber took legal action and asked the High Court to rule that other private-hire taxi operators also enter into a contract with passengers.
Under current rules, the contract is understood to be made between individual drivers and passengers, and since drivers generally fall below the £85k VAT threshold the tax is not applied.
The new decision rules that the taxi operator makes the contract, and thus ride-hailing apps will have to pay VAT at 20 per cent on what they make from each trip, as Uber already does.
Judge Alison Foster said: “I have come to the clear conclusion that Uber’s suggested construction of the 1976 Act is correct. Accordingly, the question posed is to be answered “yes“.
An Uber spokesperson added: “Today’s judgment resolves a major inconsistency in the way that rules have been applied for private hire operators across England and Wales. But whilst it clarifies many key points, there remain questions on VAT and what passengers should pay.”
