Private hire drivers face ‘uncertainty’ until VAT future is decided, warns Bolt

The private hire industry is facing a significant challenge, as confusion surrounding VAT rules could lead to higher fares for passengers, according to ridehail giants Bolt.

Operators are grappling with the possibility of a 20% increase in fares due to the current tax framework, which may hit drivers’ earnings hard.

Emily Dalton, Head of UK Operations at Bolt, warned that without a clear and standardised tax approach, drivers’ livelihoods are at risk. At present, many smaller private hire firms across the country are at risk of being required to pay 20% VAT on fares, unless the Government takes swift action.

Dalton called for the introduction of a margin scheme tailored to the private hire sector. Such a scheme would provide consistent VAT treatment across the industry and offer stability for both operators and drivers. The industry now waits on the Government’s next budget for potential intervention.

Bolt are arguing that under the Tour Operators Margin Scheme (TOMS), they should only be liable for VAT on the margin – the difference between the passenger's fare and the amount paid to the driver. The UK Tax Tribunal recently ruled in Bolt's favour, agreeing that their services fall under TOMS, meaning VAT is only applicable on the operator's margin, not the full fare. This decision significantly reduces the tax burden for Bolt, but HMRC is expected to appeal as they contest that ride-hailing services should not be treated in the same way as traditional tour operators.

Emily Dalton, Head of UK Operations at Bolt, said: “Drivers’ livelihoods are at risk due to uncertainty with the sector’s existing tax framework. There currently isn’t a standardised approach for the industry. Some private hire operators – including many smaller firms across the country – risk paying 20% VAT on fares, unless the Government takes action in the next budget.

“The Government should intervene as soon as possible by setting up a margin scheme specifically for the private hire sector, standardising VAT treatment and creating certainty and stability for both operators and drivers.”