Uber Changes Driver Contracts to Avoid New UK Taxi VAT Rules Outside London
Uber has updated its driver terms outside London so that it acts as an agent rather than a supplier. Under the new contracts, drivers contract directly with passengers and charge VAT on fares themselves, while Uber adds VAT only to its commission. This change follows VAT reforms announced in the November budget that would have taxed the entire Uber fare at 20% if implemented as originally planned.
Most Uber drivers outside London have bookings under £90,000 a year and are not VAT-registered, meaning the 20% VAT on the full fare is unlikely to apply to most trips outside the capital. However, in London, the agency model is not permitted under Transport for London rules, so passengers there will continue paying VAT on fares as before.
Andrew Brem, representing Uber, warned that the policy would raise prices for London passengers and reduce work for drivers, pointing to an inconsistent tax treatment between London and other regions. HM Treasury stated that ending the previous niche tax scheme would benefit cabbies and help fund priorities such as reducing the cost of living, waiting lists, and debt, but it did not confirm whether the projected £700 million annual VAT receipts figure would change.
Overall, the reform was anticipated since the budget announcement and has effectively shifted tax collection responsibilities from Uber to individual drivers outside London.
