Taxi Driver Online

I thought I had posted this but obviously not.

GEMINI CARS (EGHAM) LTD v REVENUE & CUSTOMS COMMISSIONERS (2007)

V&DTr (London) (Julian Ghosh QC) 7/3/2007

VAT - AGENCY

ACCOUNTS : OVERPAYMENTS : SUPPLY OF SERVICES : TAXIS : COMMISSION TAKEN FROM SELF-EMPLOYED DRIVERS : SUPPLIES TO ACCOUNT CUSTOMERS : OUTPUT TAX : AGENCY PRINCIPLE : VALUE ADDED TAX ACT 1994

A taxi hire company which provided taxi services to customers who held accounts with it was acting as principal in relation to those customers and not as an agent for the self-employed drivers. It was therefore not entitled to reclaim VAT for which it had accounted in relation to the provision of the services.

The appellant (G), a taxi hire company, appealed against a decision of the respondent commissioners refusing to accept G's claim for a refund of overpaid output tax. The self-employed drivers of the taxis did not pay a commission to G but instead paid a flat-rate administration fee to cover operating costs based on the number of shifts they worked. The drivers owned their own cars and were responsible for maintaining them. There was no written contract between G and the drivers, who were not obliged to accept bookings. G's claim arose from its alleged overpayment of VAT due to incorrect accounting in relation to customers who had accounts with G and did not pay by cash or credit card. The issue for the tribunal was whether G made separate supplies of agency services to the drivers, in which event the tax was due on the amounts paid to G by the drivers in consideration of the supply of those services, or whether G made supplies of services to the account customers, in which event the tax was due on the whole amount of the price paid by the customers for those services. G argued that the supplies were made by the drivers, for whom G acted as agent in making bookings, collecting fares and distributing those fares to the drivers after retaining a commission. The commissioners argued that, in relation to the account customers, G had a pre-existing relationship with the customer that was separate from driving work.

HELD: In the absence of a specific definition of "agent" in the Value Added Tax Act 1994, the nature of the relationship between the parties had to be determined in accordance with the general law of agency and not necessarily from the terminology used by the parties. In respect of account customers, there was a pre-existing relationship that did not exist in relation to cash or credit card customers; therefore G acted as principal in relation to the account customers rather than as agent for the drivers. This followed from the evidence that G set the terms of the customers' accounts and that the account facilities were agreed in G's name. There was also evidence that G considered itself to be bound to provide a taxi to its account customers. The absence of enforceable terms against the drivers and their ability to refuse any job reinforced the conclusion that it was G who incurred an obligation on its own account in relation to the account customers and then sought to fulfil that obligation by means of one of the drivers on its books.

The fact that the drivers were self-employed was not directly relevant. The reality of the relationship between G and the drivers was that G would pay to a driver 85 per cent of a fee agreed between G and one of its account holders in consideration of the driver's fulfilling G's obligation to provide taxi services to that customer; therefore the payment made to the driver was remuneration for acting as G's agent in relation to G's supply of taxi services.

Appeal dismissed

Counsel:
For the appellant: Richard Barlow
For the respondents: Andrew O'Connor

Solicitors:
For the appellant: VAT Consultancy (Steve McIntyre)
For the respondents: HM Revenue & Customs Acting Solicitor


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This is indeed an interesting case, I wonder if this situation would have been given a different verdict if the operator was not trying to reclaim " overpaid VAT for previous years" because of their own "errror".

Does anyone know if the operator applied the "Agents" system to more recent years and if so what the implications were for them when it was decided they were in fact "acting as principles".

If this was the case then surely the VAT office would have wanted their 17.5% regardless of if the operator had charged the account customers or not in subsequent years

Or would they have been able to change their status because of the way they changed how they operated

It appears to be what I have suspected all along, the VAT office make the rules up as they go along to suit the situation at the time but with their eye firmly on the same ball making more money.

If this particular ruling is to be a presendent, then surely the only thing that means is there is no Agents status at all that exists in direct relation to account work

Very worrying indeed for an operator who has been applying the VAT over the years in the belief that Agents status does exist for account customers. Especially as they can go back six years

What are then the implications in relation to self employment/employment status of the drivers

What are your thoughts JD

Regards confussed from London