Slave to the Algorithm? VAT, Automation and the “Gig” Economy


Nicholas Hallam,
Accordance VAT, U.K.

Nicholas Hallam is CEO of Accordance VAT, U.K.

The recent ruling by a U.K. employment tribunal that Uber drivers should be considered
as employees of the company could have far-reaching VAT implications for businesses
using a similar commercial model.

Last October, a London employment tribunal ruled that drivers for Uber—the online
platform energetically disrupting the worldwide taxi market—should be considered as
working directly for the company rather than being, as Uber had insisted, self-employed
independents. The case, brought by drivers demanding the right to the minimum wage,
could have far-reaching implications for the conduct of the “gig” economy in the U.K.
and beyond
(https://waitingfortax.com/2016/12/20/thats-one-uber-vat-problem/).

But although employment rights—and responsibility for associated social insurance—were
the subject of the hearing, the potentially greater threat to Uber’s commercial model
is an unintended by-product of the decision which concerns the collection of VAT.

I. VAT Implications of Uber Ruling

If the drivers are independent, VAT generally doesn’t need to be collected from customers
because, in the U.K. at least, the drivers are very unlikely to be VAT registered.
However, if the drivers are indeed employees of Uber, a strong case could be made
to say that Uber is in fact supplying the taxi services and as such be deemed to owe
HM Revenue & Customs (“HMRC”)
VAT due on income from customers because it is VAT registered. Uber is appealing against
the decision but it faces an uphill struggle:
the tribunal judgement deemed Uber’s description of its relationship to the drivers
to be “pure fiction.”

For Uber, the dilemma created by the employment model would be about suffering or
passing on the new VAT cost; and there is no…

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