VAT payment review on private hire vehicle fares progressing with results set in ‘due course’
- Perry Richardson
- Oct 22, 2024
- 2 min read
The Government is continuing its review on the potential impact VAT charges on fares would have on private hire vehicles (PHVs) following recent court judgments, with the results set in ‘due course’.
Alex Mayer MP raised the issue in Parliament, asking if the Secretary of State for Transport would discuss the adequacy of VAT levels with the Chancellor, specifically for demand responsive transport and public transport services using PHVs with fewer than 10 seats.
In response, Simon Lightwood, Transport Minister, confirmed that a consultation had been launched to assess the tax implications of recent court rulings on PHV operations. The consultation, which ran for 16 weeks, focused on the VAT treatment of PHVs, particularly in relation to conventional services and demand responsive transport. The Department for Transport and HM Treasury are currently reviewing the feedback.
The review was prompted by two High Court cases—Uber Britannia Limited v Sefton Borough Council and Uber London Limited v Transport for London—that clarified the legal relationship between PHV operators and passengers. The rulings initially required VAT-registered operators to charge VAT on passenger fares, sparking concerns over potential fare hikes and reduced demand.
The Government’s consultation aimed to gather input from operators, passengers, and trade bodies on the potential impact of these rulings. The outcome will help determine whether VAT or transport legislation should be amended to reduce the financial burden on operators and passengers. One option considered is introducing a reduced VAT rate for PHV services or a margin scheme to lower the VAT liability.
A key concern is the financial impact on the Exchequer, with potential changes to VAT policy estimated to cost around £750 million annually. While the appeal court ruling reversed the initial decision and shifted VAT liability back to drivers, there remains ongoing debate on whether further adjustments to the system are necessary.
Lightwood said: “The Government has consulted on the potential tax impacts on the sector and its passengers of court judgments on the interpretation of private hire vehicle (PHV) legislation.
“The consultation considered the VAT treatment of PHVs when used for conventional services and demand responsive transport. The Department for Transport and HMT are considering the responses to the consultation and will respond in due course.”
