Uber loses VAT margin scheme appeal

The case concerned whether Uber could account for VAT under the TOMS, which allows businesses to pay VAT on their profit margin rather than the full value of a supply. The scheme is most commonly associated with the travel industry, but Uber argued that it should also apply to journeys arranged through its platform. HMRC disagreed, arguing that the services supplied by Uber did not fall within the scope of the TOMS. The Court of Appeal has now sided with HMRC, concluding that the scheme was not available in the circumstances. As a result, VAT must be accounted for under the normal rules rather than on the margin alone.

The financial implications are potentially significant. Applying VAT to the full value of journeys rather than the margin increases the amount of VAT due and may affect the commercial viability of certain business models that rely on acting as an intermediary between customers and service providers. Although the case focused on ride-hailing services, the decision may have wider relevance for businesses operating digital platforms and marketplace models. Companies that have considered using the TOMS outside traditional travel arrangements may need to review their VAT treatment in light of the judgment.

The ruling is another reminder that VAT schemes designed for specific sectors cannot automatically be extended to new business models, even where there are similarities in how services are supplied.