Uber says that it may start charging UK customers 20% VAT. The announcement follows a pair of important court rulings. Earlier, the UK Supreme Court upheld a finding that Uber drivers are entitled to employee benefits. And in terms of a more recent UK high court ruling, Uber must make contracts directly with customers.
The rulings have important VAT consequences. In effect, the passenger’s contract is no longer with a private individual, but with a VAT-registered business. Therefore, Uber says, it may now have to charge VAT on all rides. The standard rate of VAT in the UK is currently 20%.
Taxing the gig economy
The Uber case was not the first time the question of gig employees’ status was tested in the courts. Early in 2021, a Dutch court of appeal upheld a ruling that Deliveroo drivers are effectively employees. The food delivery company had argued that its delivery drivers are independent contractors and not employees.
The Deliveroo and Uber cases go to the heart of the gig economy model. In addition to potential VAT implications, gig workers can plausibly claim benefits such as paid leave and a minimum wage.
When gig work isn’t just a gig
In an interesting development, grocery delivery service DoorDash is introducing a super-fast grocery delivery service. However, rather than using gig work contractors for the deliveries, the company has hired permanent staff for the job. Employees will earn an hourly wage plus tips.
It remains to be seen whether this hybrid model of both contractors and full-time employees heralds the future of the gig economy, or whether digital platforms are transitioning to news employment practices.
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