Taxi Driver Online

You could be right.

But the case in hand related to 1976 act councils not requiring licensed operator to act as the principal contractor.

As we know hackneys don’t need a licensed operator to legally take bookings.

Say a neighbour ask a Hackney to pick up his mum for him. Is the neighbour required to pay VAT on that job? Is the driver? Is the mum? Are all three?

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IDFIMH

Indeed that's quite a complex scenario, and way beyond my pay grade

Which is why I kept it simple - on a mixed circuit, most obviously, in contractual terms the transaction with a customer is surely identical whether it's an HC or PHV that's dispatched?

So why should HMRC view an HC-only circuit as different to an PH-only circuit in terms of the contractual relationships, and thus VAT liability?

As I said, in some regards the fact that HC-only circuits don't require a licence kind of makes it easier for HMRC to change the arrangements - they don't need to wait on a court case to clarify things, because HMRC can change the VAT treatment unilaterally, because HC booking offices are outwith the ambit of licensing regulation.

Of course, an HC circuit that became liable for VAT in this way could in turn challenge HMRC, but that's a whole different process and dynamic compared to the private hire angle that's been decided in the High Court last week.

That's my rough theory, at least

Most large Hackney only firms would clearly be VAT registered, so answering the question I posed myself, then HMCR would/could/should treat them in the same way as the court decided yesterday that they could treat all firms licensed under the 1976 act.

Whereas Mr neighbour, his mum and the cabby will more than likely not be VAT registered.

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IDFIMH

here's a thought and i have thought about it and cannot come up with any solution but

if you have a PH firm with say 20 cars who will now have to collect VAT on all the fares these drivers take; how would you allow for VAT on fuel, garage bills etc incurred by the driver because although it an input cost it is not the operators input cost.

It would be very unfair if the driver had to now pay VAT on their fares but not be allowed to reclaim VAT on input costs.

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

I suppose its the same situation as the makers of Mars bars.

The bars get made in the factory and those costs coupled with transportation costs are able to be claimed for tax purposes.

The eventually seller of the Mars bar will also incur business costs which will can be claimed for tax purposes.

For our trade all this seems a tad awkward, but for most of the business world its pretty straight forward.

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IDFIMH

Trying to understand this ruling, uber drivers are classed as workers with employment rights, and uber is liable for the vat on the fare as they are registered, where as a large percentage of taxi and private hire drivers are self employed in the eyes of HMRC, how will this affect self employed drivers, as, as it stands according to HMRC, a self employed person cannot charge VAT for a service, unless they are registered for VAT.

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now a licensed hackney driver

The way things stand from Friday is that every driver on a circuit, be they PH or Hackney, are entitled to workers rights as laid down by the Supreme Court in the Uber case. Actually those rights applied to us all after the Uber judgement was published, it’s just that the court on Friday confirmed indirectly that they apply to drivers licensed under the 1976 act.

What was also decided by the court on Friday was that operators are the principal contractor and councils must ensure they only license operators agreeing to that. Which in turn makes them liable for VAT on all fares.

The above is a brief summary, and there will be some slight adjustments or nuances, but broadly speaking that’s where we are.

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IDFIMH

How the operators claim and process VAT will be a matter for them, but drivers have no VAT obligations, unless they are also operators themselves.

Some of the operators are lobbying government to zero rate taxi and PH fares, all I say is good luck with that one.

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IDFIMH

The court has clearly told councils that they must only license operators that confirm they will be the principal contractor, but surely at the same time as councils undertake that change they should also only license operators that adhere to the Supreme Court judgement in Uber, and only license operators who are offering workers rights such as sickness and holiday pay, and heaven forbid the minimum wage.

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IDFIMH

I'm not sure if things will change that much for individual drivers, although I'm not really that sure about how it all works, but it's certainly not a simple case of a straightforward business with VAT on ouputs and VAT in inputs, and the difference is paid to HMRC (which is where the phrase 'value added' comes from - very roughly speaking, it's an additional tax on profit).

But, as pointed out in the TaxiPoint article, it might not be a case of the VAT being calculated on every single fare:


The 'margin' effectively being Uber's commission rate. To that extent I'm not sure how precisely it all changes. I mean, the likes of Delta's 'margin' on the fare is settle, effectively. On which they already charge VAT, presumably

So it may be the difference between fixed and percentage based fees paid by drivers to circuits. Fixed fees, obviously, being primarily the traditional trade, while the percentage based fees are effectively the norm with the app-only providers.

So if the likes of Delta had to pay VAT based more on a fare-based model, that would mean a shedload more admin, presumably, but how it would actually translate into hard numbers I'm not sure.

I mean, did Uber's fares really increase by 20% following the London ruling?

I may have mis understood but as I read it the operator now has to collect VAT on all a drivers take

so taking an arbritrary figure of say £600 with settle of £100 + vat

pre judgement 600 minus £120 driver keeps £480 and operator collects £20 VAT

post judgemet £600 minus £100 VAT and £100 settle leaves the driver with £400 (83.3% of previous)

that's quite a reduction unless you add another 20% onto the fare then the take would be £720 -£120 Vat -100 settle leaving £500 for driver

BUT customs and excise would be getting the VAT on the fare without input cost VAT being deducted

My personal opinion is that Deltas request would be fair, or, the definition of self employment needs tightening up and all these firms are going to have to do as Pete has and directly provide the cars and put the drivers on PAYE. Self employment should be reserved for a one man band who both provides the service and accepts the booking over the phone/internet

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

That's what Uber is paying at the moment, but I will be amazed if HMRC allows that to continue.

There have been a number of cases, involving the trade, where the courts have agreed with HMRC that VAT applies to the whole of the fare, not just the margin.

Should HMRC allow Uber to only pay on the margin then they will have to refund a huge amount to those trade members who have paid VAT on the full amount.

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IDFIMH

No, because they are only charging VAT on the 25% commission i.e. 5% more.

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IDFIMH

That's the law, and that's what 100s and 100s of operators currently do in relation to contract work.

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IDFIMH

Chapter and verse from the ADCU.

https://www.adcu.org.uk/news-posts/adcu ... ger-safety

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IDFIMH