Taxi Driver Online

I noticed an article on the Sun's website earlier this week about VAT, and wondered what it was all about, since it seemed a very similar article to that knocking about in the run up to the Sefton case.

But it must have been in anticipation of this...

And I suspect the impetus for this has come from the same pressure group - read it carefully and it doesn't look like it's a planted story from Treasury sources, or whatever. (Although obviously the Treasury is quoted in the piece.)

That's not to say that it isn't in the pipeline, but I don't think she'll simply announce it in the same way they announce fuel duty rises in the Budget and it's more or less immediately priced into fuel.

If she announces anything I suspect it'll be something down the line a bit. After all, the strapline is a bit misleading here, because there already is 20 per cent VAT on all cab journeys, assuming VAT registration - it's the principal/agent thing that would need to change, which would probably entail changing the licensing legislation and the booking processes as well


Reeves plots ‘taxi tax’ as borrowing costs soar

https://www.telegraph.co.uk/politics/20 ... -taxi-tax/

Chancellor expected to impose 20 per cent VAT on all cab journeys – punishing residents in rural areas

Rachel Reeves is poised to announce a VAT hike on cab journeys which will hammer residents of rural areas, industry insiders have warned.

Campaigners said the Chancellor would use her autumn Budget to unveil a “taxi tax” which would raise around £750m a year for the Treasury.

It comes after figures showed borrowing had hit record highs, excluding the Covid pandemic years, overshooting official estimates by £11.4bn between April and August.

Ms Reeves is expected to announce a slew of painful tax rises at her Budget on Nov 26 to fill a £50bn black hole in the national finances.

The taxi industry fears it could be one of the victims, with the Treasury currently considering proposals to impose 20 per cent VAT on all journeys.

Rural residents hammered

Industry figures said that doing so would push up the cost of trips outside London, disproportionately impacting those who live in the countryside.

Michael Solomon Williams, from the Campaign for Better Transport, said: “Taxis and private hire vehicles are an important part of an integrated transport mix, especially for people who live in rural areas, can’t drive or need accessible door-to-door travel.

“The focus should be on making public transport more affordable and accessible – not taxing the services that fill its gaps, hiking prices and undermining connectivity.”

Under the current rules, taxi firms outside of London do not have to charge VAT on journeys because their drivers are classed as self-employed contractors.

Individual cabbies do not hit the required earnings threshold of £90,000 a year at which VAT liability kicks in, meaning that no tax is due to HMRC.

Uber, which does charge VAT, challenged the status quo and initially won a court ruling which would have forced other companies to pay the tax too.

At that point the Government launched a consultation on standardising the system by simply applying full VAT to all private hire vehicle journeys.

The initial verdict was overturned on appeal last summer and that decision was upheld by the Supreme Court in a landmark ruling handed down in July.

Treasury plans to go ahead

But despite the decision, ministers have confirmed that they are still considering going ahead with imposing a blanket 20 per cent VAT rate.

Earlier this month Dan Tomlinson, the exchequer secretary to the Treasury, said in response to a written question on the issue: “The Government continues to take this complex issue very seriously and recognises businesses’ need for certainty.

“The Government is carefully considering the wide range of views shared through last year’s consultation on the VAT treatment of private hire vehicles and will publish a detailed response soon.”

Treasury ministers have previously suggested a decision would be announced at the budget, saying in response to another question that “decisions on tax policy are taken at fiscal events in the context of overall public finances”.

Industry insiders said they had been told that the Chancellor planned to go ahead with the VAT raid and would announce it at the budget.

‘Breach of Labour manifesto’

The Stop the Taxi Tax campaign, which has been set up to oppose the move, said that it would be a breach of Labour’s manifesto pledges.

A spokesman for the group said: “The Taxi Tax breaches Labour’s manifesto promise not to raise VAT. Not only that, it will hit those living in rural communities especially hard, who lack reliable and accessible public transport.

“We urge the Chancellor to stick to her promise, stop the The Taxi Tax and avoid dealing another blow to people in rural and isolated communities.”

Polling for the campaign, carried out by Strand Partners, found that seven in 10 voters were opposed to increasing VAT on cab journeys.

Almost six in 10 respondents living in rural villages said they would reduce their use of taxis if fares increased and half said they would find a 20 per cent rise unaffordable.

A Treasury spokesman said: “We take this issue very seriously and recognise its complexity. We are reviewing feedback from our recent consultation and will publish our detailed response shortly.”

Yes, roughly speaking, but I don't think that's wholly accurate.

And, of course, the whole piece babbles on about 'taxis' and 'all cab journeys', but then changes specifically to 'private hire vehicle journeys'.

But, as I said back when all this kicked off, I can't see the Treasury and HMRC tolerating a scenario where the VAT position is different in different parts of the UK because of the fine detail of the booking legislation, as opposed to the situation of a substantively similar service being provided throughout the UK, including Scotland.

Ditto HC circuits - although not specifically regulated by licensing legislation (although HC and PH are identical in Scotland in terms of the booking office legislation), in substantive economic terms the service is identical, as demonstrated by mixed HC/PH fleets

Is it me or does this have a whiff of uber about it ?

I wonder if the leagal battles between HMRC uber and delta have come to the attention of the desperado reeves who seems to be willing to do almost anything except raise income tax

The thing is there is a limit at which VAT starts which is well above the takings of even the london cabbies so unless there is a major change in the legislation defining self employment I can't see this actually happening unless she bars taxis and PH from the exemptions that all other businesses get.

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

One of the reasons I was never worried about the Uber - Delta/Veezu case was that I believed the government would have acted if Uber had won. If there is any truth in the article above, it appears I was 100% incorrect.

But it's the practicalities of enforcing/recovering any taxi tax that gets my mind boggling. Maybe they could do it via the tax returns, but other than that, how do they do it?

How do you calculate what an independent hackney takes (other than via the tax returns)? Also, many PH drivers multi operator/app.

Will they lower the VAT threshold to, say, £20,000? But what about part-timers?

I'm really struggling to see how it can be done.

_________________
IDFIMH

Very soon we will all be having to make quarterly tax returns so that gov.uk can get their tax quicker from the self employed it would be quite straight forward to get it through that

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

all of which forgets that there's still a number of one-man private hire operators around the country. I was one when i was ph driving in the south Kent area. I was VAT registered, my fares were cometitive compared to others as my purchases such as fuel, tyres and maintenance were 20% cheaper than those of the competition. the only VAT paid was th difference between what I bought and what I "sold". Some quarters the VAT man paid me, depending on what repairs cropped up.

If everyone was registered as they are in most EU countries, the problem goes away. It isn't rocket science using an accounting system to do the VAT. If your clients are businesses, they will claim the VAT back anyway.

nice you tube video that I've just seen talking about it

https://www.youtube.com/watch?v=ibXKS9foEv8

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

Surely it would breach HMRCs own rules on UK VAT law to remove the £90000 tax threshold for Taxi and Private hire operators only. That's would be grossly unfair.

I quite agree with you and i don't think it will happen for that reason but at the moment there seems to be dozens of potential tax raising schemes being put out there and I think rachel thieves is putting them all out there to scare us all so that when the real tax rises come shortly we'll think Oh that's not so bad

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

Bloodnock, it's got nothing to do with changing the VAT threshold - it's all about making circuits liable for the VAT on fares rather than individual cars/drivers.

But, as I said the other day, it's not that straightforward, and all tangled up with the licensing legislation etc, which would need to be amended, I think, or as per this piece in PHTM the VAT legislation would need to be amended.

But all the commentary I've seen on it - including in serious newspapers etc - is largely BS.


CLARIFICATION OVER TELEGRAPH NEWSPAPER ARTICLE: "REEVES PLOTS TAXI TAX"

https://www.phtm.co.uk/news/8121/phtm-n ... s-taxi-tax

Jonathan Main, VAT partner MHA, told PHTM: “I read the article in the Daily Telegraph with interest and thought it would be worth providing clarification of the VAT position.

While it is certainly true that the Labour Government may use the Budget in November to raise additional tax revenue, the private hire sector is not necessarily an easy target for the Chancellor.

As things stand, any operator based outside London can rely on existing HMRC guidance to only pay VAT on account work sold as principal, charges to drivers for access to passenger bookings, and fares earned by an operator’s employees.

This position was reinforced very recently by the Supreme Court victory for operators outside London.

In addition, Bolt continues to defend its decision to only pay VAT on the profit earned on fares, rather than the full fares paid by passengers. The most recent victory for Bolt was published by the Upper Tribunal in March 2025.

I understand that the case will be heard again in the Court of Appeal in mid 2026. The profit earned by Bolt would reasonably equate to the charges it previously made to drivers for access to passenger bookings.

If HM Treasury decides to target the private hire sector as a source of additional tax revenues, it will need to change primary VAT law to require operators to pay VAT in full, regardless of both the legal relationship with drivers and the ongoing litigation with Bolt.

This is certainly possible but at the very least would require very careful consideration of existing private hire licensing regulations across the UK, a clear definition of the type of journeys provided by operators which would be affected by this change, and the self-employed or worker status of drivers.

Without this, HM Treasury could not be certain how much revenue would be raised, and the potential for future challenges by the sector. There are far easier targets for the Chancellor that will raise more revenue and have less potential to be challenged in future court processes.

In my view, operators should continue to push the Treasury to publish its thoughts on the Government consultation, so that the sector can engage in more meaningful dialogue towards an outcome that suits businesses, passengers, and HMRC."

That's kind of what I've been saying

It really just can't be the case that the VAT position depends on the particular legislation the booking is made under - ie mainly the 1976 Act in provinicial England, the 1998 London Act, and the 1982 Scottish Act - they're essentially the same type of businesses for taxation purposes, so why should the VAT position depend on the minutiae of the booking legislation, and the judicial interpretation thereof?

And that, specifically, is another thing I've been saying on here for a couple of years now - the court stuff has just been about London, and then the rest of England, but because taxation is UK wide then it's going to have to include Scotland as well

And a more instructive piece in TaxiPoint yesterday, which also alludes to what I was saying about the HC angle as well, although I can't recall reading this in the HMG consultation, and don't really understand the point, although don't think I actually got through all of the consultation


Then again, the passage above doesn't really acknowledge the existence of HC circuits, and mixed HC/PH fleets in particular.

But which again relates to something else I've been banging on about since this all kicked off - why would essentially identical business transactions be treated differently for VAT purposes just because of the fine detail of the booking methodology. This is maybe what's being alluded to in this other passage from the TaxiPoint piece:


Which is a bit like the principle in accounting and tax and the like, which says economic substance takes precedence over legal form.

A classic example of that which relates to taxation and the trade is a car purchased on HP - in the fine detail of the law you're not the car owner until the HP agreement ends - the HP provider owns it

But as far as your tax position is concerned, you're treated as being the car owner - so that's 'the principle that tax follows the economic reality of contracts' in terms of the language used by TaxiPoint above while the strictly 'legal form' of the HP agreement is that the finance provider owns the car until you've completed all the payments (and the option to purchase or whatever at the end is just the contractual formality which says you then become the vehicle owner).

So forget the nitty gritty of the booking processes under the several pieces of licensing legislation regulating the trade - it's more about the reality of the situation in terms of business transactions.

Or something like that

Anyway, this is the link to the TaxiPoint piece. Another thing - HMRC and HMG must have been looking into the employment status thing during the consulation process, because although not precisely the same, it's inextricably linked. But to that exent they'll now be aware that it's very, very, messy and in terms of the legality of it all there's a lot going on that shouldn't be

https://www.taxi-point.co.uk/post/the-g ... udget-taxi

The thing is that the current employment /self employment /gig economy mess suits American tech companies who own or run most of these apps.

Any attempt to clarify and rewrite the self employment rules might be seen by Trump as an attack on American tech giants and Starmer would be too scared to risk that

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