Uber, a ride-hailing application, is being pursued by the UK tax authority in an ongoing dispute over VAT.
The company claimed that HM Revenue & Customs “disputed the amount and method” in which it applied VAT to UK mobility business.
Uber’s half-year results, published on Tuesday, revealed that, as a result of the assessment by the tax authority, the company was owed an extra £386mn (US$491mn).
Uber intends to appeal the decision before the UK Tax Tribunal.
Last month, it paid £386mn (£386mn) to HMRC. This money will be reimbursed if it wins its appeal.
Uber reached a settlement last year with HMRC, which saw the company pay £615mn in tax to the tax office. This was after Uber lost its case before the UK Supreme Court 2021 regarding the VAT treatment for its drivers.
Uber argued it was exempted from VAT as its drivers are self-employed contractors. The Supreme Court, however, ruled that Uber’s drivers should be considered employees.
The latest tax dispute centers around the changes made by the San Francisco-based firm to its business model following the Supreme Court’s ruling in March 2022.
HMRC has challenged Uber’s use of the Tour Operators Margin Scheme, a rule designed to simplify the VAT process for tour operators. Minicabs and ride-hailing applications also use these rules.
Uber argues that private-hire operators are entitled to pay VAT based on their profit margins rather than the full cost of the trip, as HMRC claims, according to sources familiar with the matter.
Uber stated: “Urgent clarification is needed for all of the industry to protect drivers, passengers and other stakeholders.”
HMRC stated: “We are very good at ensuring that large businesses pay their taxes and we actively challenge them when they don’t.”
Dan Neidle is the former head of tax for law firm Clifford Chance, and founder of Tax Policy Associates. He said that it was “hard” to predict which party will win in the end.
He said that it could take up to a decade for the dispute to be resolved, as there are likely going to be appeals and counter-appeals.
A date has not been set for the court hearing.
Uber won an appeal at the UK High Court last week over the VAT applied by taxi hailing firms and private cab drivers in the UK outside London.
Uber’s Supreme Court defeat in 2021 had led to the need for a new case to be brought against competitors.