Taxi Driver Online

For anyone not up to speed with the issue, this is quite a good article on the Professional Driver website.

Sussex posted something about the case in a thread a few months ago, but don't think I was paying enough attention

I daresay it's been covered in PHTM etc, but it's a while since I've read it.

This seems quite a good summary of what it's all about though, but please note it was published in June.

Confusingly, one of the people quoted is called Kevin Sefton - what are the chances of that?


Uber has mounted a legal challenge in Sefton, to charge VAT on all fares. Should we be worried?

https://www.prodrivermags.com/opinions/ ... e-worried/

By Mark Bursa | 22 June 2022, 22:41

Much of the chatter around the stands at recent taxi trade events was about Sefton. Not the heroic police horse, but a forthcoming court case involving, once again, Uber, in the Merseyside borough of Setfton.

There’s much wailing and gnashing of teeth about this case, with the most extreme opinions suggesting a kind of armageddon for the private hire industry. Why? Because we’ll all be forced to pay VAT, apparently.

The case has its origins in last year’s Supreme Court ruling about Uber’s London operations. Lord Leggatt’s ruling meant that a passenger was entering into a contract with the operator when they made a booking, instead of the passenger having an agreement with the driver. This logically stems from the ruling that Uber’s drivers were “workers”, not independent contractors.

Uber has announced that it will soon have to start charging its UK customers VAT at 20% after a High Court judgement, pushing up the cost of rides.

A judge has ruled that UK private hire taxi operators must make contracts with their customers. This could have massive consequences for the industry.

This follows on from our previous coverage of Uber, outlining that Uber drivers should be treated as workers, not contractors.

The Supreme Court’s judgement is still rippling through Uber’s working model. On top of the human rights implications, as well as the effect on sick pay and holiday pay, the ruling has broader implications for the relationship between operators and passengers. Lord Leggatt’s ruling meant that operators were essentially entering into a contract with their customers when they accepted a booking, instead of the passenger having an agreement with the driver.

The VAT implication is clear. Uber is a VAT-registered business, whereas most private hire drivers are not – they don’t earn enough to reach the threshold for VAT. The Supreme Court’s ruling that the contract is between the passengers and the operator (Uber), not the driver, so VAT must be paid on every journey.

This means basically a 20% fare increase, but collection of tax revenue into the economy that was previously being avoided. Uber didn’t like the ruling, but it has gone along with it, and now it wants to see if it applies nationally, not just in London.

This is because London’s private hire sector is governed by a different act of parliament, the Private Hire Vehicles (London) Act 1998.

The court ruling in London stated: “In order to operate lawfully under the Private Hire Vehicles (London) Act 1998 a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking.”

Transport for London has accepted the judgement, and has issued guidance to all London operators, with a view to them complying with the ruling – and therefore charging VAT. Operators are having to change their business model status to “merchant” in order to comply – and most appear to be falling into line.

Why is this a problem? For any corporate clients, paying VAT on a cab fare is no big deal. It can be claimed back. And with apps such as Uber’s offering cashless payments, it’s pretty easy to account for it.

It’s more problematic for private jobs, where a £50 fare becoming a £60 fare could make a difference. Then again, one could argue that fares were too low in any case, and perhaps the VAT imposition gives operators a chance to reset their fare structure – so the £50 fare starts off as a £60 fare, and VAT makes it a £72 fare.

Kevin Sefton, CEO of personal tax app Untied, said: “As a big company, Uber should be charging VAT on its services – and should have been in the past. This could add up to £1bn or more in back taxes.”

He added: Uber customers are likely to see prices rise to take account of the VAT. From a driver perspective, demand could possibly fall as a result of these price rises, or they may need to share some of the hit.”

Uber is now acting as if it has some kind of moral high ground (having lost its case), recently stating: “Every private hire operator in London will be impacted by this decision, and should comply with the Supreme Court verdict in full. All operators will need to carefully consider the court’s judgement and take steps to ensure that they comply with it, including considering whether any changes to their way of working are required”.

Which brings us to Sefton. Uber is now taking Sefton council to court in order to test whether this ruling should be applied outside of TfL’s jurisdiction.

Uber is taking Sefton Council to court, seeking the following declaration from the High Court, which would bring Sefton into line with London:

“In order to operate lawfully under Part II Local Government (Miscellaneous Provisions) Act 1976, a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking.”

Sefton Council issued a notice “to the attention of interested parties, including licensed PHV operators and licensed drivers, and anyone who wishes to join into these proceedings.”

What will happen if Uber wins? If the court rules in line with London, then Uber will have to pay VAT in Sefton. It is safe to assume that it will interpret this as being the case in other areas too, and we can expect Uber to start charging VAT wherever it operates its direct model.

But then what happens to the many operators that are now taking on Uber jobs via the Local Cab network, run via Autocab’s iGo network? Will these operators be expected to pay VAT as well? Whose contract is it, when a passenger in Manchester opens up the Uber app, but books a Local Cab car from, say, Street Cars?

Given the separation between the Uber services and the Local Cab services, it’s likely that the “operator” is Street Cars. The Sefton ruling will clarify whether the contract is with the operator (Street Cars) rather than the Street Cars driver, who may be a self-employed contractor. In which case, VAT would be charged, and the fare would rise (unless VAT is already being charged, which may be the case, in which case nothing happens!)

Not all operators agree with the fundamental principle established in the Supreme Court that taxi or private hire drivers are “workers”. Veezu, one of the largest UK operators, disagrees fundamentally, and uses very careful wording at all times to stress that its “driver partners” are self-employed.

A Veezu spokesperson said: “We use specific terms as driver partners are independent businesses in their own right – they are not Veezu employees, nor our workers. The driver partners are all licenced by the local authority, and they don’t belong to us.”

“The Passengers are not Veezu’s customer; technically, they are the customer of the driver partner.” Veezu even describes the process of taking on “driver partners” as “driver attraction”, because “driver partners are not recruited as they are self-employed. They partner with Veezu.”

This is all specifically aimed at distancing Veezu from any national ruling that might stems from the Uber/Sefton ruling. It would presumably require an action by a union against Veezu to challenge Veezu’s own assertion that its drivers are “partners” , not workers or employees. And it may take several rulings as Veezu operates in multiple locations, and as we know, local authorities have different interpretations of the rules.

Ultimately, the Sefton ruling will really only define what happens in Sefton. It will require further cases, further challenges elsewhere (probably from more militant unions such as the App Drivers and Couriers Union) in connection with attempts to define drivers as “workers” across the UK.

It also brings into focus the need to implement proper local standards within the industry, which would allow definitions of driver status and VAT liability to be made at a national level, once and for all, rather than via countless local rulings that may or may not apply elsewhere.

The industry needs to consider this: On one hand, many complain that fares are too low. On the other, there is fear that a 20% VAT imposition would make fares too expensive. Profitability is problematic – maybe, rather than a threat, the forced price hike may be an opportunity to press the big reset button.

Worth going through that again, as it's unusual to read why operators think the Supreme Court Uber employment status ruling doesn't apply to them. But as regards the substance, can't really see anything there that would mean Veezu drivers don't come under the ruling. I mean, taking on 'driver partners' is 'driver attraction' rather than recruitment, because they're self-employed? Oh, my aching sides

That's just deflection and comms blather rather than addressing the legal substance of the Supreme Court ruling on 'worker' status.

But I'm not really sure what all that has to do with the Sefton case, which is basically about whether an operator taking a booking is a principal in terms of paying VAT. Surely if the court agrees with the declaration, it will apply to all operators?

And if all operators are principals in terms of the contractual arrangements and VAT, this will simply highlight the clash between the likes of Veezu and thousands of other private hire operators on the one hand, and their 'self-employed' drivers on the other hand.


But the Sefton ruling is about VAT per se, not employment status, which is a different if related issue.

And HMRC doesn't have to wait to apply the court's declaration across the country if operators are deemed principals in terms of VAT. If it applies in Sefton, it applies everywhere governed by the 1976 Misc Prov Act

On the other hand, the author is right that any extension of 'worker' status depends on local litigation against individual operators, and it's not every driver or association that wants to put their heads above the parapet. And, as the author says, only the more militant organisations like the ADCU are in a position to test the waters and set the ball rolling.

But if HMRC does start treating operators as VAT principals, then that will surely bring into focus the clash with the fact that the vast majority of PHDs are currently deemed self-employed?

I think

far too many believe that dressing things up in alternative words gets around employment law

I think if it all comes to a head Veezu like many others will find themselves classed as employers

The government is in need of additional tax revenues and can't realistically squeeze any more out of excise duties or income tax so VAT and self employment reform might well become the target

after all by classing people as self employed the government are missing out on 15.05% employers surcharge on their wages as well as VAT on the turnover. How long will it take before this is realised as the biggest available tax gain for the UK government

As for the VAT well how can a court realistically rule that rules on VAT are wrong BUT the making tax digital "revolution" would make it much easier for the government to lower the VAT threshold

_________________
lack of modern legislation is the iceberg sinking the titanic of the transport sector

Yes. And it's no different to Veezu's recent rebranding stuff providing "a clear purpose for Veezu by establishing a differentiated and meaningful market positioning", and that "the brand messaging was also updated to better demonstrate the functional ability of Veezu as well as the emotional benefit that using a local provider that invests in the community can create."

It's all professional bull$hit, and underneath the veneer it's the same old $hite.

Ditto the employment status thing. Calling the plebs 'driver-partners' and the recruitment process 'driver attraction' doesn't change the substance one iota in terms of the question of employment status and whether or not a legal challenge would change things in terms of the Supreme Court Uber judgement.

It's like the 'sharing economy' stuff in the early days of Uber, and the likes of Uber turning drivers into artisans

Just think, if any of us signed up with Uber, we could call ourselves artisan drivers

Anyway, this was posted on TaxiPoint a couple of weeks ago. This isn't the whole article, but mainly just what was said in Parliament about the Sefton case:


PHV VAT: Government reveals HMRC are ‘considering any implications’ from Uber and Sefton litigation

https://www.taxi-point.co.uk/post/phv-v ... litigation

If Uber win their court case with Sefton Council, ALL licensing authorities outside of London could then be forced to follow suit.

In a House of Commons debate Daniel Zeichner, Labour MP for Cambridge, asked the Transport Minister whether she has had recent discussions with Cabinet colleagues on the potential impact of VAT levels on private hire operators.

Lucy Fraser, DfT Transport Minister, said: “I know the hon. Gentleman is a keen champion for this area, given that he is chair of the all-party parliamentary group on taxis. He will know that the question of whether a private hire vehicle operator needs to pay VAT depends on two factors: whether he is acting as principal or as agent; and whether he meets the VAT threshold. As he will also know, HMRC is responsible for VAT."

Zeichner responded: “There are 16,000 private hire operators across the country and an impending court case could change the complicated relationship between customer and operator. The worry is that if that change comes into effect, as a consequence of the court case, many small operators could be at risk. What plans does the Department have to deal with that contingency? Will the Minister agree to meet me and representatives of the industry to discuss that further?”

Frazer added: “I am aware of the litigation that he refers to. HMRC is considering any implications that that may have on VAT payable by private hire vehicle operators. As he will know, the Government keep all taxes under review at all times. I am sure that the Minister responsible for this area, Baroness Vere in the other place, will be happy to meet him.”

Not sure if that's the best way to put it.

Rather, if the case concludes that operators in Sefton are principals in contractual terms under the 1976 Act, and thus liable for VAT on all runs, then it would similarly apply to all operators governed by the 1976 Act, thus all operators in England outside London.

So it's maybe not so much about licensing authorities in England being 'forced to follow suit', rather than perhaps offering advice to operators regarding their VAT status and business structure, as TfL did in London.

So if the Sefton case goes in favour of Uber, it would be more about all private hire operators in England being 'forced to follow suit' as regards VAT, and of course HMRC would be responsible for compliance.

Maybe some in the trade should worry, but I’m far from convinced it’s going to effect us all.

How will operators know how much a cash job goes, unless the driver calls it in every time?

What happens with split bags?

What happens if you get passed the occasional job from a mate who has an ops license?

What happens if a hackney only firm passes on work, when they don’t have an ops license nor the requirements to keep details of bookings?

No fan of these online mobs that offer longer jobs, often airport wok, do they pay the VAT on the job, as well as the operators that take on the work?

What if work is passed to drivers from off shore booking agents?

And does a government already in the sh** really want to charge, I hazard to use these words, the old and vulnerable an extra 20% on their cab fares?

_________________
IDFIMH

So much bull$hit there from certain areas. Surely any law made at or decided by the High Court at national level applies across the board. You can't have a local law that is stricter than national law as already discovered under various vehicle age cases.

If you make a contract with anyone on the phone/on line/in person, that person, whether a "person" or a "virtual person" such as a booking agent or limited company is the one who the contract is made with. The fact they may pass the booking on to a driver is immaterial, the contract is still with whoever took the booking. There's enough case law on that sort of thing.

How will it affect the individual driver? He will have to pay 20% of his fare to uber or whoever took the booking and pass that onto the hirer. But then he could also become voluntarily VAT registered. This would enable him to claim back every penny on everything he buys for his private hire business, VAT on fuel, car servicing tyres, repairs, parking charges etc. and his charges towards whoever he's working for. The only one actually paying more will be the punter who is not a VAT registered person. the rest will be claiming it back as a business expense.

Sussex, yes, it's all potentially a lot messier than Uber's model or a straightforward traditional private hire operator with owner-driver cars.

But messiness and difficulties keeping records isn't really a reason to exclude a business from the VAT regime. If a business is lawfully within the VAT regime then it no doubt makes it more difficult for that business in terms of record-keeping (not to mention, obviously the financial implications), but them's the rules.

Suppose a circuit only did cash runs, for example. Correct me if I'm wrong, but if the court declares in Uber's favour then it wouldn't matter if a circuit did all cash, or automated payments only, or, as is more likely, a mix of cash and cards.

And, for example, it wouldn't need the circuit to record every cash run, and instead daily/weekly or monthly records could be submitted by individual cars and drivers. Which, obviously, would entail a lot more paperwork and number crunching, but that's not really the point. And, of course, such records should exist already in terms of income tax compliance, or at least that's the theory from the legal and HMRC's perspective

On another of your points, of course the ruling won't directly cover unlicensed HC circuits, but in terms of economic substance I can't really see how HMRC could say a circuit covered by a PH op's licence is a principal in terms of VAT, but an identical HC circuit isn't, while in substantive economic and practical terms the HC and PH bookings are precisely the same.

Which, obviously, is underlined in terms of mixed HC/PH circuits. Is the circuit going to be a VAT principal for jobs despatched to PHVs, but not a principal for jobs despatched to HCs?

Or, for example, Lewes-badged HCDs would be the principal in terms of bookings while working for Uber, but for Brighton-badged PHD bookings Uber would be the principal?

Anyway, we'll just have to wait and see how it all pans out.

But, of course, the lawyers, judges and 'experts' tend to view these things in terms of a neat and tidy industry of independent HCDs working the ranks, and owner-driver PHDs working for circuits, but of course it's all a whole lot messier. Just as when Uber appeared on the scene, the experts and others viewed Uber as a totally different beast from the traditional private hire and minicab trade.

Of course, as most of us on here knew, an-app only system doesn't really make a platform that different to traditional platforms, as indeed the VAT thing might demonstrate to those who'll maybe now appreciate the similarities between Uber and the mainstream trade, rather than just thinking of Uber in terms of differences.

And, as regards the kind of point made above, saw this in a post on a specialist VAT site that I nearly posted, but this particular paragraph is maybe the most relevant:

https://www.vatcalc.com/united-kingdom/ ... operators/


So what happens if they're on a circuit, particularly working alongside PHVs and a licensed operator who's deemed a principal in terms of VAT?

The main issue as I have stated before is that a Hackney fare that is determined by the meter is deemed to be inclusive of VAT if the driver/company operating the car is VAT registered and you can't, in those circumstances, add 20% for VAT. So someone who is just over the threshold is at a huge disadvantage of one that is just under. Also If a driver were to operate a vehicle that is built or adapted to carry 9 passengers or more and that vehicle is licensed to carry 8 passengers then that vehicle is zero rated so you can be VAT registered and claim back all your output VAT without charging your customers VAT and you get a nice payout every 3 months.
We had this with our limos. They were built to carry 9 people plus the driver so they were zero rated. But by removing the front passenger seat they would be licensed for 8 passengers.

_________________
Grandad,

Regardless of if we like it or not there are laws that permit and do not permit us and companies to do.

In relation to VAT and tax there are loopholes and rules. Assuming you cannot exploit the loopholes either due to cash restraints or how your business is structured then that will determine your fate.

Uber are a global company. If they are smart (and they have the cash to be smart) they would have their main operation or would be based in a tax free state such as Jersey or the Cayman Islands etc.

Assuming they have structured themselves in this way then they will not be required to be VAT registered as they are not a UK business.

However, if there are weaknesses in their set-up HMRC will probably find them and accordingly probably rule them to be VAT compliant. That seems to be the case from the previous ruling.

From what I can tell Uber made some major errors in their business model. Probably due to arrogance or ignorance they got sloppy.

Features such as giving the customers the power to rate drivers after a fare which can enable them to choose not to have the same driver again for a future fare is a tool that ultimately gives Uber control which was one of just many reasons why the court ruled the drivers as "workers".

I believe Uber punished or prevented in some manner drivers from logging into and out of the app when they wanted to which again was a stupid mistake.

If they are self-employed all drivers can log in and log out whenever they want to and should not be penalized for doing so. Uber should have encouraged this from the start but they wanted control and control is what determines if the drivers are self-employed, workers or employees.

Uber are their own worst enemy in some respects.

If they have already had a ruling against them I can't see it getting overturned unless they can prove mistakes were made in the ruling. Highly unlikely but a possibility.

For any budding entrepreneur out there, the possibility still exists for an app based taxi service provider that connects passengers with drivers outside the normal scope of how businesses usually operate.

This could be done that benefits drivers and passengers in equal measure.

It looks as though Uber have failed in that manner. Perhaps someone else will pick up the mantle.

A cayman island registered company trading in the uk would still pay VAT just not corporate tax which uber don't pay anyway

_________________
lack of modern legislation is the iceberg sinking the titanic of the transport sector

Had kind of forgotten about that - didn't Uber limit the number of hours a driver could log on for?

But you're right - that sort of thing is hardly consistent with self-employment. On the other hand, there's a touch of tall poppy syndrome about that sort of thing. I think Uber did that in response to bad publicity regarding safety, so effectively a PR stunt?

Didn't they just limit actual driving hours, or something like that, so in reality it made little difference because it didn't include time drivers spent waiting for work?

So to a degree Uber's being penalised for stuff that much of the trade gets away with. On the other hand, Uber is hoist by its own petard as regards its PR and comms blather - it restricts driver hours for PR purposes (but in effect that makes little substantive difference to safety, but it satisfies the PR imperative), and then is caught out by the PR move in terms of employment status, because it's seen as exerting more control over drivers.


I think that's been the theory for some time now, but in reality it's a very tough gig. Recall that local apps seemed to be ten-a-penny at one point, but most have sunk without trace. It's a bit like the internet being a great leveller in the early days, because any Tom, Dick or Harry could set up a website and get listed on a search engine, blah, blah.

But in a way it's ended up even more uncompetitive and monopolistic than the old economy, with the likes of Google, Facebook, Twitter and Amazon exerting huge dominance over their specific markets.

'Taxi' apps the same to an extent, and beyond the likes of Uber and Bolt, it's a very difficult market to penetrate to any great degree. And, I mean, whatever happened to Ola? Seemed to be starting up everywhere at one point, but haven't heard a peep about them for ages (of course, you-know-what might be a factor, but Bolt and Uber still expanding, or at least expanding in different ways).

So the app market quite easy to get into to the extent that a geek can do the coding from behind a computer screen and with a minimal budget, and without getting their hands dirty trying to start a 24-hour cab office back before smartphones and apps.

But it's when the two collide - you have the app, but getting real word drivers on the street interested is a different thing - that the theory doesn't quite concur with the practice. Of course, some have done it and gotten very big, but as for the rest...

Yes, and a point well made. On the other hand, that's a question that any business becoming VAT-registered must face. Even if they're operating in a market where they can charge what the want, they can't just automatically add the VAT to their prices without consequences, or presumably they would have been charging that price in the first place

Of course, HCs are not directly relevant to the declaration that Uber is seeking. On the other hand, find it hard to believe that if it goes in Uber's favour then HMRC won't have to consider the question of mixed HC and PHV fleets operating under the same operator's umbrella, and to that extent it's not a great leap to then consider the position of HC circuits doing jobs despatched from unlicensed HC-only offices.

Don't know about anyone else, but to me there's not really a lot of difference in terms of the practicalities and economics, and to that extent it makes little difference if the 'platform' is licensed as a PH operator, or doesn't need a licence as an HC-only circuit.

Likewise, Uber says that because of the London declaration they've added VAT to fares throughout the *UK*, hence the need for a declaration regarding provincial England operators governed by the 1976 Act.

But to the extent that leaves the question of Scotland unaddressed, it's worth recalling that the 'booking office' legislation up here is identical as regards whether it's HC or PHVs that the office is despatching jobs to. So to that degree the Scottish legislation underlines that treating HC and PH circuits different as regards the VAT position is more than a tad anomalous. There may be several different legislative regimes governing the UK trade, but of course taxation and VAT law is the same throughout the land.

Anyway, we'll just have to wait and see, and even if the Sefton decision eventually does ripple through to the HC trade, I suspect it'll be more of a slow burner than the impact on PH operators

And, for what it's worth, it's maybe instructive that a written Treasury question in the House of Commons last month seemed to draw an equivalence between taxis and PHVs regarding VAT, assuming I'm not reading too much into it. But you get the impression 'taxi' here is used in the technical rather than informal sense, ie in the way I use the term HC on here:



Apart from that, the answer is a classic case of deflection, but obviously the Treasury won't want to say too much until the Sefton case has actually concluded