Lawyer Jolyon Maugham took an Uber on Monday in London but it was no normal ride. He was on his way to deliver a letter to the ride hailing service's headquarters that could kick off legal proceedings potentially costing the U.S. start-up millions of dollars.
Maugham's case revolves around how much tax Uber pays in the U.K. and if successful, could have wide-reaching implications across Europe. Britain has something called value added tax (VAT) which is paid when you buy goods or services. The current rate is 20 percent.
Uber pays no VAT in the U.K. because the ride-hailing app does not class its drivers as employees. Instead it says it is connecting riders to drivers.
"Uber says that it is a business to business service. It says that it is supplying the taxi drivers with an introduction service but that proposition suffers from two deficiencies. The first is that it doesn't really accord with what you and I would think of as reality because we think that Uber is a consumer facing brand, it's not a business facing brand. So it doesn't look like reality looks like," Maugham told CNBC by phone on Friday.
"In an employment tribunal case last year, they found that Uber was engaging its drivers as workers and it also went on to say, and this is the necessary logical consequence of the first proposition, that Uber is supplying transportation services and it is making a VAT-able supply."