VAT CONCERNS: Government consultation closes next month which could see private hire fares rise by 20%

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Private hire passengers, consumer groups, and drivers are being encouraged to participate in a nationwide consultation that could lead to a 20% increase in private hire vehicle fares.

The Government initiated the consultation following a significant lawsuit by ride-sharing app Uber against Sefton Council. The outcome of this case could result in passengers paying VAT on all journeys.

Layla Barke-Jones, a Dispute Resolution Partner from Aaron & Partners, represented Delta Taxis and other Liverpool-based private hire operators. Their aim was to protect passengers by challenging Uber’s court case.

In the ex-Chancellor’s Autumn Budget last year, he announced a consultation to be conducted by the Treasury, HMRC, and the Department for Transport. Barke-Jones welcomed this initiative. The Government projects an annual £1.5 billion revenue from VAT in the taxi and private hire industry.

The Treasury’s consultation is open until 8 August.

Barke-Jones said: “We were disappointed at the outcome of the case, which could be hugely damaging to so many. If these changes are enforced it will bring more price rises for the general public amid a cost of living crisis, as well as a huge administrative burden for operators.

“The decision in favour of Uber was handed down by a judge some nine months ago, however its impact is yet to be felt by the industry.

“Given the potential for such large fare increases in the wake of the judgment we called on the Government to take urgent action to prevent the charges from being implemented. This consultation will be absolutely key and, simply put, the stakes could not be higher. We are urging everyone who works in the industry or even gets taxis from time to time, to have their say.

"This change will have a greater impact on some sections of society, especially the elderly, disabled and vulnerable who are reliant on the services of the taxi industry. Following the outcome of the case involving our client, Delta Taxis, the Government have made clear that they now consider that private hire taxi firms will need to collect VAT from passengers to hand over to the Government.”

Barke-Jones added: “We are still adamant these charges are unnecessary. Private hire vehicle drivers like those at Delta are crucial to their communities, local economies and the overall transport infrastructure. They have run their business in a way which serves the community for years in a way which central and local Government have accepted as correct. The new interpretation of the law creates a burden on those businesses and more significantly on passengers which we consider is unnecessary under the current regime.

“We will be challenging the judgment at the Court of Appeal in July in an attempt to have the previous position restored. Whilst the decision is awaited from that case we are urging business and individuals to have their say on the consultation."