Uber fares could rise after High Court ruling

9th December 2021 | News

The ruling

UK customers could see a rise in Uber fares after the private hire vehicle company (PHV) lost a potentially landmark High Court case.

Uber had previously operated under the claim that it acted as an ‘agent’ for bookings, with the contract being between drivers and passengers. However, the High Court ruling has found that it is unlawful for a PHV operator to act in this way.

For those who might not be aware, Uber is a hugely popular ride-hailing service provider that operates via an app. The firm’s headquarters are in San Francisco, but the company is now worldwide, providing customers with private hire vehicles, food delivery, and other services.

What does this mean?

Essentially, the ruling means that Uber will now be potentially liable for VAT (Value Added Tax).

Unlike most other private drivers, Uber is VAT registered and so it is even more likely that they will need to start paying the tax.

The ruling comes after an earlier High Court judgment in which it was determined that Uber drivers should be treated as workers as opposed to contractors. When this ruling was made, Lord Justice Leggatt suggested that it meant a private hire operator like Uber had to enter into a contract with its customers when it accepted a booking, rather than the passenger only having a contract with the driver of the vehicle.

How will this affect customers?

Although the ruling relates to Uber in London, Uber and the App Drivers and Couriers Union, which was a defendant in the case, both anticipate that the ruling will have to be followed by licensing authorities across the country.

The result of Uber being forced to pay VAT will mean the firm facing a potentially substantial tax bill. It is fairly obvious that the outcome of this will fares increasing in order to cover the extra costs.

This will be disappointing to most customers as a large part of Uber’s allure was the cheaper price point in comparison to other taxi services, such as the more traditional black cabs etc.

The ruling means that if Uber continues to operate in this way, they will be acting illegally and so must get their affairs in order if they wish to continue offering a service.

It is not clear when, or if, prices will start to increase, but it is something to be aware of for those who make regular use of the convenient ride-hailing app.

As always, if you would like any further information regarding the above, please feel free to contact our offices by emailing info@williamsoncroft.co.uk.

Williamson & Croft is a market leading accountancy, advisory and tax firm with particular specialisms in property, construction, retail, digital and creative, technology and professional services.

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