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The Supreme Court’s ruling in Uber

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After many years of progression through the courts and with wide implications for the gig economy and beyond, the Supreme Court, in Uber BV and others v Aslam and others [2021] UKSC 5, confirmed that Uber drivers are workers and are therefore entitled to worker’s rights including holiday pay and national minimum wage.

The case

The issue was whether, for the purposes of the statutory definition, the claimants were to be regarded as working under contracts with Uber London under which they undertook to perform services for Uber London; or whether, as Uber argued, they were to be regarded as performing services solely for and under contracts made with passengers through the agency of Uber London. The Supreme Court justices rejected the agency contention.

The justices stated the findings of the employment tribunal justified its conclusion that, although free to choose when and where they worked, that at times when they are working, drivers work for and under contracts with Uber (and, specifically, Uber London) and were within the statutory definition of ‘worker’. 

Relevant factors were:

  • the drivers’ remuneration is fixed by Uber; 
  • the contractual terms on which drivers perform their services are dictated by Uber;
  • although drivers have the freedom to choose when and where (within the area covered by their PHV licence) to work, once a driver has logged onto the Uber app, a driver’s choice about whether to accept requests for rides is constrained by Uber. Control is also exercised by monitoring the driver’s rate of acceptance (and cancellation) of trip requests;
  • Uber exercises a significant degree of control over the way in which drivers deliver their services including through the use of the passenger ratings and warnings or termination of employment if a driver fails to maintain a specified average rating; and
  • Uber restricts communication between passenger and driver to the minimum necessary to perform the particular trip.

Taking these factors together, the justices decided that the transportation service performed by drivers and offered to passengers through the Uber app is very tightly defined and controlled by Uber. 

The impact

The decision will impact the business models of many in the gig economy; and demonstrates the significant costs of getting an individual’s status wrong.

Whilst this is an employment case, the worker finding certainly gives doubt to the self-employed status for tax purposes and it is likely HMRC will want to consider if PAYE and NICs is outstanding. As the off-payroll working rules come in for the private sector from April 2021, it’s a further reminder of how uber tricky determining employment status is and the importance of focusing on the reality of the situation where the written documentation may not reflect that reality. 

However, the case does not give clarity to businesses or transparency for workers regarding tax as there is still only tax categorisation for an employee or the self-employed, but not a worker; thus highlighting the increasing need for a change to the current system. 

In addition, the decision adds to the debate around Uber’s VAT position, and whether Uber acts as an agent or principal for VAT purposes. HMRC is reported to have raised protective VAT assessments of £1.5bn against Uber on the basis that it is Uber rather than its drivers who supply the transport service to passengers, which could mean that Uber is liable to VAT on the full value of the taxi fares, not just its commission. It will be interesting to see how this case plays out; but the findings in the employment rights case give some clues and highlight possible implications for other platform providers.

The opportunity

Many will be looking to the forthcoming Budget to deliver an announcement on a statutory test of employment status. The government has already trailed that it will publish a range of tax consultations on 23 March, and this would be an ideal opportunity to consult on the alignment of a tax statutory test and a legal test for a potential start date of April 2022. 

As the covid-19 government support schemes come to an end, is this a chance to ‘build back better’ in tax and finally give businesses certainty on applying correctly employment tax and legal status? 

Carolyn Brown, Susan Ball & Sarah Halstead, RSM
Issue: 1521
Categories: In brief