Taxi Driver Online

Been meaning to post this for a few weeks now. It's a 'tax insights' piece from international accountancy and tax specialists KPMG, issued just after November's Budget.

And maybe a good summary of the current position, although it's slightly legalistic and specialist in tone.

But a bit better than some of the nonsense that's been floating around in recent weeks

And to an extent it has to be technical in tone to convey accuracy, because it's a very complex legal and taxation scenario

Or at least I think it's a good piece. Because it's all still fiendishly complicated

(There are links to the original legal judgments, but the blue default colour used by the forum software means they're not particularly easy to see.)


Autumn Budget 2025: VAT increase on private hire vehicles (PHVs)

https://kpmg.com/uk/en/insights/tax/tmd ... icles.html

VAT will become due at 20 percent on the full fare for licensed taxi operators operating a principal model for PHVs

28 November 2025

From 2 January 2026, VAT will be due based on the full fare charged by PHV operators, rather than on the gross margin, increasing the tax due from those who operate a principal (buy/sell) model rather than an agency model.

Tour Operators Margin Scheme (TOMS) VAT rules require businesses operating as principal to calculate the VAT due based on the gross margin rather than full selling price and currently applies to businesses providing services of any kind commonly provided by tour operators for the benefit of travellers, e.g. bought in passenger transport.

Whether a PHV business acts as agent or principal is typically driven by the PHV regulatory regime, with recent court decisions impacting on the VAT treatment. The 2021 Supreme Court decision in Uber BV and others (Appellants) v Aslam and others (Respondents) confirmed that under the Greater London regulatory regime, operators must act as a principal (rather than an agent) and buy in the taxi ride from the independent driver and supply it on to the traveller.

Following that decision, many PHV operators (acting as principal) began accounting for VAT under TOMS on their supplies in the UK, and not just in Greater London. HMRC then challenged the use of TOMS and Bolt Services UK Ltd moved forward as the lead case. HMRC have now lost at both the First-tier Tribunal and the Upper Tribunal with an appeal hearing at the Court of Appeal scheduled for May 2026. In Autumn Budget 2025 the Government has pre-empted the outcome of this litigation for future periods, specifying that certain PHV supplies fall outside TOMS, so the ongoing litigation will only have retrospective impact - effectively moving the goalposts from 2 January 2026.

In a recent regulatory decision (D.E.L.T.A. Merseyside Limited and another (Respondents) v Uber Britannia Limited (Appellant)) in connection with the regime outside of London the Supreme Court ruled that a PHV operator has the choice of acting as a principal or a disclosed agent.

As a disclosed agent the PHV operator would only be liable to account for VAT on its agency fee, which would be broadly equal to the margin for a similar business undertaken as principal under TOMS. The Government has confirmed that the 2 January 2026 VAT legislative change does not affect PHV operators acting in a disclosed agency capacity. This appears to open the possibility for PHV operators to implement an agency model outside London, alongside the principal model for Greater London. HMRC may challenge these arrangements if they are not properly implemented, so any change to the business model will need to be implemented in a very clear, consistent and robust way.

It might be that a fully implemented agency model outside of London, which is compliant from both a regulatory and VAT perspective, will be the end of the road. However, the EU is implementing its ‘VAT in the Digital Age’ package from January 2030, which will require platforms which facilitate ground passenger transport and short term accommodation to charge VAT on the full price paid by the customer (e.g. the full fare) where the underlying supplier is not VAT registered, regardless of agency status. While no similar rules have been announced in the UK, the UK Government may have a watchful eye on the new EU VAT regime in future.

A very good, and IMO clear breakdown of where we are.

I do, however, think that the government will change the rules at some point to make what currently applies in London also apply outside of it.

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IDFIMH

I see Taxi Point has headlined a Treasury written parliamentary question and answer as meaning:

Treasury rules out further VAT reforms for taxi and private hire sector following recent TOMS clampdown


Not really how I would characterise it - reads to me like a non-committal non-answer that doesn't really address the substance of the question. And may just a deliberate deflection to avoid a substantive answer, either because they don't really know the answer right now, or because they don't want to let the cat out of the bag at this stage


Answered on 12 January 2025

Andrew Snowden, Opposition Assistant Whip

To ask the Chancellor of the exchequer, whether she plans to bring forward further reforms to VAT treatment within the taxi and private hire vehicle sector.

Dan Tomlinson, The Exchequer Secretary

Private hire vehicle (PHV) services provided by VAT-registered businesses are, and always have been, subject to the standard rate of VAT (20%).

The Government’s announcement at Autumn Budget 2025 puts an end to the exploitation of a VAT administration scheme, designed for the tour operator sector, by a small number of large private hire vehicle operators seeking to pay a lower rate of VAT than others.

This won’t affect smaller operators outside London whose drivers contract directly with passengers, or black cabs, neither of which have attempted to exploit this scheme.

https://www.theyworkforyou.com/wrans/?i ... 5.102931.h

So all the answer seems to do is state that HM Treasury has closed the TOMS loophole, and then really just states the current legal position, as the post at the top of this thread does in more detail.

But says absolutely nothing about the future intentions asked about in the question

And in fact the same identical answer was used on the same session in response to a LibDem question about "the potential impact of VAT on taxis and private hire cars in rural areas".

https://www.theyworkforyou.com/wrans/?i ... 5.103128.h