Uber UK rewrites drivers' contracts to avoid VAT

[watty]

Uber [UK] rewrites contracts with drivers to avoid paying UK’s new ‘taxi tax’ (Guardian, 2 Jan 2026)

Uber has swerved paying millions of pounds to the UK exchequer under Rachel Reeves’s new “taxi tax” after the ride-hailing app rewrote contracts with its drivers.  The move came as rules announced in November’s budget took effect, which adjusted how VAT is payable on minicab fares and would have resulted in the whole Uber fare becoming subject to the 20% sales tax.  In November, Reeves told the Commons the changes would end up “protecting around £700m of tax revenue each year”.

However, updated terms issued to Uber drivers from January 2026 mean the technology firm will act as an agent, rather than as the supplier, of transport services outside London. The move means drivers make a contract directly with their passengers – so they must charge any VAT due on the fare, while Uber only adds VAT to its commission.

As most drivers are not thought to be making more than £90,000 in bookings a year, and therefore do not have to charge VAT, the majority of Uber fares outside London will avoid becoming more expensive, since the 20% sales tax will not apply.  The new contracts do not relate to London, where the agency model is not allowed under Transport for London rules. As a result, Uber passengers in the capital will pay VAT on their fares.  Uber’s change to the terms with its drivers has been expected since the budget announcement.

At the time, Andrew Brem, Uber’s regional general manager for the UK, said: “The government’s action today to change the rules will mean higher prices for passengers in London, and less work for drivers, when people are already struggling with the cost of living … This decision also establishes the absurd situation where a trip in London will be taxed at a different rate than a trip anywhere else in the UK.”

An HM Treasury spokesperson said: “Ending this use of a niche tax scheme by online minicab firms will both benefit everyday cabbies with a fairer tax system and raise money to help deliver the country’s priorities – cutting the cost of living, cutting waiting lists, and cutting debt and borrowing.”

It did not say if Uber’s changes would affect its estimate of “protecting” £700m a year of receipts from the new policy.

Looking at the TfL reference, I wonder does it have any implications for Uber-style below-cost selling/mega discounts for us?  My brain doesn't work too good this hour of the morning!

FN, bless their souls, have been paying the VAT because they love us but they have been writing this at the bottom of their driver emails for awhile now... "At Freenow we act as an intermediary between taxi-and-private-hire-vehicle-drivers, company owners, providers of other mobility solutions, and you as a passenger or rider."  I presume the others do the same?  Anybody got an Uber or Bolt email stashed away?

[Cool Boola]

Told ya so….

[silverbullet]

Uber [UK] rewrites contracts with drivers to avoid paying UK’s new ‘taxi tax’ (Guardian, 2 Jan 2026)

Uber has swerved paying millions of pounds to the UK exchequer under Rachel Reeves’s new “taxi tax” after the ride-hailing app rewrote contracts with its drivers.  The move came as rules announced in November’s budget took effect, which adjusted how VAT is payable on minicab fares and would have resulted in the whole Uber fare becoming subject to the 20% sales tax.  In November, Reeves told the Commons the changes would end up “protecting around £700m of tax revenue each year”.

However, updated terms issued to Uber drivers from January 2026 mean the technology firm will act as an agent, rather than as the supplier, of transport services outside London. The move means drivers make a contract directly with their passengers – so they must charge any VAT due on the fare, while Uber only adds VAT to its commission.

As most drivers are not thought to be making more than £90,000 in bookings a year, and therefore do not have to charge VAT, the majority of Uber fares outside London will avoid becoming more expensive, since the 20% sales tax will not apply.  The new contracts do not relate to London, where the agency model is not allowed under Transport for London rules. As a result, Uber passengers in the capital will pay VAT on their fares.  Uber’s change to the terms with its drivers has been expected since the budget announcement.

At the time, Andrew Brem, Uber’s regional general manager for the UK, said: “The government’s action today to change the rules will mean higher prices for passengers in London, and less work for drivers, when people are already struggling with the cost of living … This decision also establishes the absurd situation where a trip in London will be taxed at a different rate than a trip anywhere else in the UK.”

An HM Treasury spokesperson said: “Ending this use of a niche tax scheme by online minicab firms will both benefit everyday cabbies with a fairer tax system and raise money to help deliver the country’s priorities – cutting the cost of living, cutting waiting lists, and cutting debt and borrowing.”

It did not say if Uber’s changes would affect its estimate of “protecting” £700m a year of receipts from the new policy.

Looking at the TfL reference, I wonder does it have any implications for Uber-style below-cost selling/mega discounts for us?  My brain doesn't work too good this hour of the morning!

FN, bless their souls, have been paying the VAT because they love us but they have been writing this at the bottom of their driver emails for awhile now... "At Freenow we act as an intermediary between taxi-and-private-hire-vehicle-drivers, company owners, providers of other mobility solutions, and you as a passenger or rider."  I presume the others do the same?  Anybody got an Uber or Bolt email stashed away?

Uber are agents in London, but not outside London?

Contracts between driver and passenger are agreed under Uber rules [ who are agents for themselves].

But they're based in Holland for tax purposes.

F**king Trump touts!!

[Rat Catcher]

Uber UK isn't based in Holland. TfL won't licence firms operating from outside the UK.

ULL - Uber London Ltd - operates Uber in London.

[silverbullet]

Uber UK isn't based in Holland. TfL won't licence firms operating from outside the UK.

Big f**king offices there. Funny how Uber Eats is on Burgerweeshuispad 301, 1076 HR, Amsterdam.

[silverbullet]

Uber UK isn't based in Holland. TfL won't licence firms operating from outside the UK.

ULL - Uber London Ltd - operates Uber in London.

Are they agents for Uber, or Uber agents masquerading as a tax loophole?

[Rat Catcher]

No. It's a fully owned subsidiary. TfL has no jurisdiction in Holland hence they don't issue licences to Dutch firms. NTA have no jurisdiction in Holland either but they let Uber's Dutch subsidiary use a licence issued to some other firm based in Limerick.

[silverbullet]

No. It's a fully owned subsidiary. TfL have no jurisdiction in Holland hence they don't issue licences to Dutch firms. NTA have no jurisdiction in Holland either but they let Uber's Dutch subsidiary use a licence issued to some other firms based in Limerick.

A workaround to avoid paying tax the the Irish exchequer, so to speak.

[Rat Catcher]

To some extent. It facilitates VAT evasion on the part of drivers who work for the firm, I guess... but it's the drivers who are breaking the law, not Uber. I guess it also serves to exempt the firm from any meaningful regulation and prevents any enforcement action on the part of NTA.

[silverbullet]

To some extent. It facilitates VAT evasion on the part of drivers who work for the firm, I guess... but it's the drivers who are breaking the law, not Uber. I guess it also serves to exempt the firm from any meaningful regulation and prevents any enforcement action on the part of NTA.

Would a change in Irish tax law soften Uber's cough?

It's all double Dutch to me!

[watty]

Would a change in Irish tax law soften Uber's cough?

It's all double Dutch to me!

That's what I was thinking this morning.  If TfL can put manners on them, maybe the NTA could do similar?  Afterall, as well as the above, I believe TfL has pulled their licence twice already (one because they didn't vet their drivers properly and two, because some of their drivers couldn't speaka da lingo proper-like).

[Rat Catcher]

Both heavily flawed given that TfL is responsible for vetting and licensing PHV drivers in London.

I'd imagine Uber's brown envelopes are sufficiently filled to prevent NTA seeking to enforce relevant regulations.