TfL’s VAT consultation submission on private hire vehicle tax treatment to be published
Transport for London (TfL) will soon release its response to the Government’s consultation on VAT treatment for private hire vehicles (PHVs).
The confirmation came from London Mayor Sadiq Khan in response to a query from London Assembly Member Elly Baker.
Baker pressed the Mayor to confirm whether TfL had contributed to the consultation and requested the publication of its submission. Khan responded that TfL did provide feedback and assured Baker that the response would be published ‘shortly’, with her office notified upon release.
The Government launched the consultation in April 2024 to examine the implications of recent legal judgments affecting VAT liability within the PHV sector. Key issues included potential fare increases for passengers and reduced earnings for drivers due to the VAT charge on fares imposed on VAT-registered PHV operators.
The consultation followed two landmark legal cases: the 2023 Uber Britannia Limited v Sefton Borough Council, overturned on appeal, and the 2021 Uber London Limited v Transport for London. These cases initially clarified that PHV operators must contract directly with passengers, thereby incurring VAT obligations. The appeal’s success has shifted VAT responsibility back to individual drivers, but broader concerns remain unresolved.
TfL’s submission, along with other contributions from operators, drivers, and trade bodies, will help shape Government policy. Potential reforms under consideration include legislative amendments to revert to pre-judgment practices, applying reduced VAT rates, or introducing a sector-specific margin scheme. Any legislative change could have significant fiscal implications, potentially costing the Treasury £750 million annually if VAT obligations for PHV operators are removed.
The consultation period, which spanned 16 weeks, closed in August. The Government will analyse the responses and issue a formal report outlining its next steps. TfL’s input will likely offer insight into how London’s regulatory authority views the balance between industry viability, passenger costs, and the broader tax system.
Sadiq Khan said: “Transport for London (TfL) did respond to the consultation. TfL will publish its response shortly and will confirm to your office when it has done so.”
