Chancellor announces consultation on VAT treatment of Private Hire Vehicles starting early 2024

The Chancellor of the Exchequer, Jeremy Hunt, has committed to consult on the VAT treatment of Private Hire Vehicles (PHV) in early 2024. The announcement was made in the Autumn statement delivered earlier today.

The decision follows a recent High Court ruling in the case of Uber Britannia Ltd v Sefton MBC, which inadvertently triggered tax regulations requiring 20% VAT on private hire fares for the first time in the industry's history. This change has raised concerns among private hire operators across England, who have been lobbying for a 0% VAT status for PHV journeys.

Included in the Autumn statement, the paragraph reads: "5.81 VAT Treatment of Private Hire Vehicles – The government will consult in early 2024 on the impacts of the July 2023 High Court ruling in Uber Britannia Ltd v Sefton MBC."

Private hire operators, including some of the country's largest PHV companies, have been vocal in their efforts to secure a change in tax status. They argue that a 20% VAT on private hire fares would have a detrimental effect on the industry, resulting in declined demand, reduced driver earnings, and potentially burdening passengers with fare hikes.

The introduction of VAT on private hire fares has raised questions about the fairness of the current tax regulations, particularly considering that licensing laws for the industry have been in place for nearly half a century without such tax implications. The consultation will provide an opportunity for the Government to assess the impact of the court ruling and consider the potential consequences for the industry and its passengers.

Jonathan Main, a partner and Head of VAT at the law firm MHA Moore and Smalley, said via LinkedIn: “I have previously publicised the steps being taken to put pressure on HM Treasury and HMRC to extend zero-rating to private hire.

“It would certainly be in the industry's best interests to continue to apply pressure in the run up to publication of the consultation, which will contain the Government's proposed changes to VAT on private hire journeys.”

Liam Griffin, CEO of Addison Lee, said: “We welcome the Chancellor’s commitment today to reviewing VAT on private hire journeys. After the Court ruling against Uber in 2021, Addison Lee took the decision that the right thing to do - legally and morally - was to apply VAT on the full fare paid by our passengers.

"No other major operator has followed us in paying the full VAT on the full fare. In fact, the absence of clear guidance from HMRC means that most have sought to pay as little VAT as possible.

"This leaves our business, as well as other long-standing operators in our local communities, at a competitive disadvantage and potentially represents a significant loss in tax revenue due to the Exchequer.

“It is crucial that the Government seeks to level the playing field in the private hire industry in London and across the country, and we would welcome clear guidance from HMT and HMRC on how VAT should be applied and enforced.”