Uber Decision: What are the tax implications?
It’s been all over the news (if you haven’t seen it, where have you been?!) since the tribunal agreed that Uber drivers are workers, meaning they should be entitled to basic worker rights. Uber have since suggested that they will appeal this decision.
Much of the media coverage regarding the recent Uber decision has focused on employment law, however, there are tax implications that need to be considered.
HMRC enforce the national minimum wage (NMW) and they are considering what course of action to take in regards to enforcing payments to drivers and the penalties to Uber.
But HMRCs involvement in Uber goes even further. HMRC focus on tackling false self-employment, therefore as Uber drivers are now classed as workers for employment law, does this mean they are employees for tax purposes?
Employees are a subset of workers, however, workers are not always employees. The employment law and tax tests which determine whether or not an individual is an employee, they are similar, but not the same.
But, what will happen if HMRC decides that Uber drivers are employees for tax? National Insurance contributions, expense claims and PAYE.
The drivers will currently pay NICs at the self-employed rate, however, if HMRC deem them to be employees, they will have to make higher contributions at the employee rate.
If the drivers are deemed employees, they will be entitled to claim a mileage allowance, however, it could be lower than the deductions they currently claim.
Uber would have to operate a PAYE on the payments to their drivers. Uber could end up being liable for employer’s contributions at 13.8%.
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