SUPREME COURT SHOWDOWN: Barke-Jones discuses private hire operator threat as Uber continues push for VAT overhaul
- Perry Richardson
- 20 minutes ago
- 5 min read
In an exclusive Q&A session, TaxiPoint Editor Perry Richardson sat down with Layla Barke-Jones, Dispute Resolution Partner at Aaron & Partners, to delve into the high-stakes crowdfunding campaign launched by Delta Taxis and Veezu.
Their aim? To secure £500,000 to challenge Uber’s approach to VAT obligations at the Supreme Court. The session explores why some operators are acting now, highlighting the risks of a significant
shift in the industry. With potential consequences for VAT liability, business models, and employment structures, both traditional operators and drivers stand at a pivotal crossroads. The discussion also tackles the role of government intervention and what the future could hold for a sector on the brink of major change.
Why is now the time for other private hire operators to get involved?
The risk to the industry has never been greater. Traditional firms have relied upon the agency model to run their business and keep them competitive. This has already been ruled against in London and now the rest of England and Wales faces the same plight if Uber are successful at the Supreme Court. The previous government was very clear, through the consultation, that if Uber are successful in this case, this will mean that all private hire operators need to charge VAT on all journeys. Those that aren’t currently charging VAT may need to change their entire model.
Others who allow the drivers to keep the fare, including when often paid in cash will require a complete rethink. The operators will remain liable for VAT whether or not the driver comes into the office to hand it over. This isn’t about exemption - it’s about ensuring consistent rules across the sector so traditional operators aren’t unfairly penalised. Burying your head in the sand is not an option. If an operator should have been charging VAT but didn’t, they’ll be facing a significant bill from HMRC, and the guidance is clear on this. Meanwhile the recent decision allowing Bolt to be able to use the TOMS scheme – meaning they only need to charge VAT on the difference between what the passenger pays and what the driver receives – will deepen the disparity between traditional private hire operators and ride-hail based platforms.
Uber are seeking a ruling that the only way for those using the agency model in England and Wales – those providing booking services as agents for the drivers - to survive in their current form is to win the case at the Supreme Court.
After appeals from both sides of the arguments already, is the Supreme Court the ‘last chance saloon’ for both sides?
The Supreme Court is the highest court in the land, there is nowhere else to go after this, it really is ‘last chance saloon’. If the Supreme Court do not agree with us there will be no future for the agency model in the industry unless there is a change in the law.
How could the private hire vehicle sector change for both drivers and customer should Uber win?
Drivers will become the agents of operators (not the other way around). They will be responsible for collecting fares and collecting VAT. If the fare isn’t already paid directly to the operators (as ride hail apps do), then the driver will be responsible for handing over the VAT - 20% - from every fare to the operator for them to add to the VAT return and pay to HMRC. Since operators will be taking on a risk for this and will be taking on additional cost in completing the VAT returns, they may also raise their fees to drivers to account for the additional costs and risks.
Many operators using the agency model may choose to fold. This would force drivers to seek work with other operators – and that shift could also affect their employment status. For example, drivers going from a traditional agency model where they operate on a self-employed basis may find their operator no longer can compete if they need to add VAT and incur the costs of completing VAT returns. A result of this could mean forcing drivers to app-based providers who only offer drivers worker status, like Uber - following the Supreme Court ruling against them in 2021.
Realistically, drivers will also be hit with falling demand. Customers are the real victims if the agency model is scrapped as a result of this case.
They will have to pay 20% more for journeys which were previously exempt from VAT because the drivers didn’t reach the threshold for VAT, and they will likely also see a reduction in choice of providers as a number of operators fold. Customers who prefer to use telephone booking and cash are likely to find there is much less opportunity to find an operator who meets those requirements (since not taking payment centrally will give operators the headache and risk of being able to collect the VAT from drivers for their returns). Reduce supply and increased fares for VAT will hit customers hard, and particularly those in vulnerable sections of society who are reliant on private hire for essential journeys.
Can the Government still step in to change VAT exemption liability for the taxi and private hire sector? Should they?
Buses and trains are zero-rated, this means the customers do not have to pay VAT, but the bus or train provider can still reclaim the VAT it spends on business expenses. TOMS, the scheme used by some operators to charge less VAT, prevents the operator from being able to reclaim the VAT they spend on business expenses. The previous Government mooted ideas regarding zero rating private hire, giving it a low rating (at 5%) or introducing a margin scheme (VAT charged on profits) similar to TOMS. Nothing appears to have happened as a result of that consultation which closed in 2024, and the industry should not sit back and wait for zero rating, low rating or an industry specific scheme.
The Government consultation appeared to dismiss or otherwise back off from zero or low rating as it would deprive the Treasury of income it currently received from those operators who charge VAT at the moment. The consultation appeared to favour a margin scheme which would presumably impact operators on recovering their VAT on business expenses. However, there has since been a change in Government and the priorities in relation to raising public finances appear to have shifted. The industry cannot afford to wait to see what the Government will do on VAT. We are very clear that if VAT is going to apply, it must do so in a way that preserves access to transport for the people who rely on it most.
There is less need for the Government to act if the choice of models which has existed for nearly 50 years under the current legislation is permitted by the Supreme Court. Therefore, our focus is on protecting the industry through the current legal battle rather than depending on the Government to take affirmative action.
