Uber Technologies, Inc. (Uber) as my company for my discussion topic
of this week. When reading and interpreting the information
reflected in the 10-K form, filed on 12/31/2021, I found that Uber in
its financial presentation, estimated a liability for contingencies
related to non-tax and litigation matters of the normal course of
business. These contingencies amount to $2.2 billion, of which $1.3
billion correspond to matters not related to income tax. In note 15 of
the 10-K form it is mentioned that Uber is under domestic and
foreign audits, and this audit corresponding mainly from its
transactions with drivers, and from the tax treatment of certain
employee benefits and related employment taxes matters, that were
probable and reasonably estimable. It is also mentioned in this note,
that the main audit procedure in which they are involved is with the
United Kingdom and is involved the presence of the HMRC (UK tax
regulator) which is seeking to classify them as a transportation
provider. Being classified as a transportation provider would result in
a VAT (20%) on Gross Bookings or on the service fee that they charge
Drivers, both retroactively and prospectively. They mentioned in the
text: “HMRC is considering a number of factors, including driver,
passenger and business-to-business contractual arrangements, and
HMRC is also expected to consider the UK High Court ruling of 19
February 2021 on the worker classification of drivers, to determine
whether we (Uber) should be classified as a provider of transportation
services” (SEC.gov/Archives/Edgar/data…, 2022). It is also mentioned
that if they do not agree a satisfactory resolution with the HMRC,
they would move the case to the United Kingdom Tax Court because
they consider that they have a meritorious defense in this process. As
of the date of the filing of the 10-K form with the SEC, Uber was
unable a specific any amount which may be subject to the ruling of
the British tax court to predict the specific contingency, so it was
mentioned in the footnotes.
With respect to audit procedures to identify contingent liabilities, we
could evaluate some of the examples mentioned in our McGraw Hill
Education literature: “1) Reading the minutes of meetings of the
board of directors, committees of the board, and stockholders ; 2)
Reviewing contracts, loan agreements, leases, and correspondence
from government agencies; 3) Reviewing tax returns, IRS reports, and
schedules supporting the entity's income tax liability; 4) Confirming or
otherwise documenting guarantees and letters of credit obtained
from financial institutions or other lending agencies; and 5) Inspecting
other documents for possible guarantees or other similar
arrangements" (Messier, Glover, & Prawitt, 2017). In the case of Uber
that I choose for my participation this week, I would consider the
possibility of including expert lawyers in local tax matters as a part of
the audit team, so that they review all the possibilities and existing
jurisprudence in similar cases, trying to minimize the possible impact
of the results from the official UK body.
References:
https://www.sec.gov/Archives/edgar/data/1543151/00015431512
2000008/uber-
20211231.htm#i41f3a487140149eaa115f268f79d2e06_112
https://www.gov.uk/search/all?keywords=case+with+Uber+Vs+HM
RC&order=relevance&page=2
https://news.bloombergtax.com/daily-tax-report-
international/ubers-u-k-court-loss-leaves-behind-2-1-billion-tax-
question
https://prod.reader-ui.prod.mheducation.com/epub/sn_58f0c/data-
uuid-fc972a9186104c0296511489324ca396#data-uuid-
ee91a04ef0fe449fa369e3db82938416
