Correct. TUPE does not cover self-employed people, so the vast majority of taxi drivers are not covered, which is what the county councils play on.
You, as the employer, have specific responsibilities toward your employees which if you don't follow, could end up with YOU being taken to an industrial tribunal for unfair dismissal! If the new contractor fails to offer your staff further employment, he could be sued. If he then backs the contract, the TUPE rights remain with your (former) employees.
I done a lot of research on this matter, and there was a good section about what constitutes employment and who is elegible. the example that sticks in my mind was security staff employed at the Olympic site. They would not be liable to transfer under TUPE once the games were over as the contract was only for the duration of the games. I suppose the same could apply to taxi or bus contracts, but that would have to be written into the conditions of employment.
But yes, make your council do the legwork for my case! After all, they're <supposed> to have very good legal departments, let the b,stards work for their excessive fees.
In some ways the requirement of a regular taxi run is different to that of a school bus, inasmuch as a school bus is likely to run for ever, as there will always be 50 kids needing to go from A and B to school X. They will be a different 50 kids every 6 years, but they will usually always be there. A taxi run is a bit more exclusive. you get 2 kids from A, 1 from B, 1 from C and go to school X. After 6 years, the kids at A have left, but kids fro B and C still go for another 2 years, so the route has changed. If the kids at B leave first, the route has not substantially changed, as you still have to go from A to C then school X.
Linky here might be useful:
http://www.acas.org.uk/index.aspx?articleid=1655