Uber faces new £386 million VAT assessment dispute with HMRC, but does record first operating profit
Updated: Aug 3, 2023
Uber Technologies Inc. recently disclosed a significant dispute with HMRC regarding the application of Value Added Tax (VAT) to their UK Mobility business.
In their financial results statement for the quarter ending 30 June 2023, Uber revealed that the UK Tax Authorities had contested the amount and method of VAT application since March 2022, resulting in an assessment of £386 million (approximately $487 million).
Under the current UK tax system, taxpayers are required to pay the disputed amount upfront in order to access the tax court system. If the taxpayer successfully disputes the assessment, the payment is then returned.
In July 2023, Uber made the payment of the £386 million assessment to proceed with their dispute in the UK tax court.
This payment is expected to impact Uber's operating cash flows in the third quarter of 2023, but it will not have any immediate effect on the company's income statement.
Further details regarding the specific issues raised by HMRC have not been disclosed.
An Uber spokesperson told TaxiPoint: “Urgent clarity is needed for the whole industry in order to protect drivers and passengers.”
Uber Technologies Inc. did however reach a significant milestone by recording its first ever operating profit in its history. The achievement comes as demand for Uber trips surged by over a fifth in the past year, resulting in a notable boost to the company's financial performance.
According to the financial results released by Uber, the company reported pre-tax earnings of $326 million (£255 million) from its operations in the year ending June. This marks a significant turnaround from the previous year when Uber faced an operating loss of $713 million (£558 million).
Since unveiling its financial details in 2014, Uber has accumulated substantial losses amounting to tens of billions of dollars. While the company has previously reported profits after tax, these were mainly driven by revaluations of equity investments or proceeds from asset disposals rather than its core operations.
In the past year, Uber witnessed a 22% increase in trips booked on its ride-hailing platform, leading to a surge in demand for its services. This growth in demand played a pivotal role in driving Uber towards its historic operating profit.
Uber also reported a 14% uptick in turnover, reaching $9.2 billion (£7.2 billion) and the company managed to keep its costs under control, with expenses growing at only 1%.
