ICAEW.com works better with JavaScript enabled.

Uber drivers are workers. What does that mean for tax and employment?

Author: ICAEW Insights

Published: 15 Apr 2021

Earlier this year, the Supreme Court ruled on a landmark employment law case involving Uber. Mark Hammerton, partner at law firm Eversheds Sutherland, explores the fallout and what it means for tax.

When several Uber drivers brought a claim in 2016 that they were not, in fact, self-employed, but 'workers', a lot rode on the ultimate decision. 

This 'worker' definition is a halfway house between self-employed and employed. It entitles workers to the national minimum wage and benefits such as statutory holiday pay, but not the full employment rights of an employee, including redundancy pay and minimum notice. 

At the end of February, the Supreme Court ruled in favour of the drivers, creating ramifications across the 'gig economy' and other self-employed workers. 

The Uber case

"Uber's central argument was that: 'we're just like AirBnB, just like eBay. We're a platform and people use it. We're not the employers of these drivers just like you're not an employee of eBay when you put on your old wardrobe to sell,'" says Mark Hammerton, partner at law firm Eversheds Sutherland.

However, the argument came down to the relationship between Uber, its drivers and its customers. Uber set the fare, set the contractual terms without negotiation and restricted the communications between the drivers and the customers.

Uber also monitored to what extent drivers accepted jobs or cancelled jobs, which impacted the amount of work a driver got. Drivers were also reviewed, which fed back, ultimately, into their ability to use the platform.

"Drawing all that together, you've got someone who is subordinated to you and economically dependent on you. Instead of having a more side by side contractual, commercial relationship, the employer is up there, and I, as the driver, am down here," says Hammerton.

The fallout

This ruling has shown the 'readiness' of the courts to intervene to protect individuals' rights, says Hammerton. They are willing to pierce through the expertly crafted documentation that lawyers and accountants have put in place and all structures that Uber had.

"For example, in the Uber case, they argued: 'we're just a platform'. But the courts looked through all of that. They identified individuals who are economically dependent, controlled by and subordinate to the corporate."

He suggests the implications have already been felt across the corporate world. "Sometimes, I think lawyers overdo the wider implications of cases, but we've already seen more concerns as to whether the supply chain is treated appropriately. There is a wider awareness of the importance of worker rights in the public discourse of supply chains."

Uber itself announced it would pay the national living wage and holiday pay from March, following the legal battle. Parcel delivery service Hermes also started offering a self-employed plus contract last year, allowing workers up to 28 days paid leave and £8.50 per hour. 

What about tax?

Employment status and tax status are determined differently. While there is the in-between of 'worker' within employment status, there isn't the same for tax.

"Uber drivers were seeking worker status, which gives them the most basic protections," says Hammerton. "But not the full range of rights an employee would get. Tax is different in that it is binary. Employee or not an employee, there is no intermediate type status akin to 'worker'."

Though this is an employment case, with Uber workers still considered self-employed for tax purposes, it may be that HMRC will want to revisit whether PAYE and National Insurance contributions are outstanding.

There has already been a crackdown on 'disguised employment' through IR35 tax legislation, Hammerton says.

"The wider context, HMRC is trying to cut down on disguised employment and to ensure that people in the contractor market pay the correct tax and National Insurance contributions so that we can have schools, hospitals, roads and the services we need."

An outcome is that organisations look at their supply chain and check their status; is it genuinely self-employment, or does it class as employment for tax purposes?

There is also a question of VAT; if Uber is the transportation provider rather than an intermediary between drivers and customers, there is potential for the business to owe large VAT back payments. Campaigners estimate Uber's VAT liability could be up to £2bn. However, the outcome of this remains to be seen.

"The Uber case is going to be significant," says Hammerton. "No two cases are ever the same, it's true to say. There is a difference between the Uber drivers and, say, an expert consultant with a day rate of many hundreds of pounds. Where you have the corporate versus the relatively low paid individual, one can see a readiness to intervene to protect the individual." 

Further reading: 

Future of Tax

As HMRC launches its review of the system that underpins the tax system, we take a look at the pressing issues and challenges.

Stylised image of a mobile phone in someone's hand

More support

A megaphone
Stay up to date

You can receive email update from ICAEW insights either daily, weekly or monthly, subscribe to whichever works for you.

Sign up
ICAEW Faculty
Find out more about the Tax Faculty

The Tax Faculty offers expert guidance and support enabling you to provide the best advice on tax legislation to your clients or business. We offer clear direction in taxing times. Membership is open to everyone.