Taxi association ‘seeking reassurance’ that any PHV VAT changes don't affect taxi sector

The Licensed Taxi Drivers’ Association (LTDA) have become the latest to voice strong concerns regarding the latest Government consultation around VAT liability in the private hire vehicle (PHV) sector.

The statement from Steve McNamara, LTDA General Secretary, follows a new consultation document issued by HM Treasury and the Department for Transport, focusing on potential regulatory changes following recent High Court decisions.

The consultation seeks to address the implications of High Court rulings from 2021 and 2023, which have altered the VAT obligations of PHV operators. These judgments have shifted many PHV businesses from accounting for VAT as agents to doing so as principals, a move intended to streamline tax compliance and promote equitable competition within the industry.

In light of these legal changes, the Government is considering amendments to transport and VAT legislation. The proposed modifications could allow PHV operators to maintain their status as agents for VAT purposes while continuing to provide services as principals. This could potentially lessen the VAT burden on these operators and prevent fare increases for passengers.

Another aspect includes the possibility of encouraging unregistered PHV drivers to voluntarily register for VAT. This measure would enable them to reclaim VAT on major expenses, such as vehicles and fuel, whilst not having to charge VAT on the services they render, potentially leading to lower overall costs for consumers.

McNamara highlighted concerns that any changes might negatively affect the taxi sector, particularly if PHV operators can lower their fares due to reduced VAT obligations, combined with the ability for PHV drivers to offset substantial costs against VAT. The LTDA are now seeking assurances that the adjustments will not place licensed taxi drivers at a competitive disadvantage.

McNamara said: “We will be responding strongly to the consultation to emphasise the ongoing importance of the two-tier system of taxi and PHV regulation, which guarantees passenger choice and public safety and must not be undermined in any way.

“We will also be seeking reassurance that any changes made to the VAT treatment of private hire vehicles do not put licensed taxi drivers at a competitive disadvantage.”