Following a High Court ruling, Uber has stated that it may soon be forced to charge 20% VAT to its UK clients, raising the cost of trips.
It comes after a judge ordered that private hire cab drivers in the United Kingdom must enter into contracts with their clients.
It might have far-reaching implications for the business, and other private hire companies may be forced to charge VAT as well.
It comes after a separate ruling earlier this year that determined Uber drivers should be classed as employees rather than independent contractors.
Lord Justice Leggatt indicated at the time that this judgement meant that when a private hire operator like Uber accepted a booking, it had to enter into a contract with the consumer, rather than the passenger simply having a contract with the driver of the car.
Uber, unlike most private drivers, is a VAT-registered company, which means it will have to begin charging the tax.
Uber took this to the High Court in an attempt to overturn it, but the High Court has now affirmed it.
“Every private hire operator in London will be impacted by this judgement, and should fully comply with the Supreme Court verdict,” an Uber spokeswoman stated.
The judgment was “noted” by a representative for Transport for London, which supervises private hire companies in the city.
“All operators will need to carefully study the court’s decision and take steps to ensure that they comply with it,” he added.
Although the case involved the Private Hire Vehicles (London) Act 1998, which only applies in London, Uber and the App Drivers and Couriers Union, which was a defendant in the case, both anticipate the verdict to be upheld by licensing authorities across the UK.
“Rather than reform its failing business model, Uber was determined to double down on misclassification at the expense of worker rights, passenger safety, and VAT avoidance,” said James Farrar, general secretary of the App Drivers & Couriers Union (ADCU).
“Our win will make misclassification illegal, alter the London taxi business for the better, and finally put an end to widespread worker rights violations in the sector.”