WHAT IS TOMS? The tax scheme entering the frame for the taxi and private hire vehicle sector
- Perry Richardson
- Apr 1
- 2 min read
Updated: Apr 6
A recent tribunal ruling has brought the Tour Operators’ Margin Scheme (TOMS) into sharp focus for the UK’s private hire and taxi industry.
Traditionally seen as a VAT mechanism for travel agents and holiday firms, TOMS has now been confirmed as applicable to ride-hailing services, provided certain conditions are met. The Upper Tribunal’s decision in HMRC v Bolt Services UK Ltd has opened the door for operators in the PHV sector to consider using the scheme.
The case centred on whether Bolt’s on-demand services—ordered and paid for via its app—qualified as travel services under TOMS. The tribunal said yes. It ruled that Bolt, acting as principal and buying in transport services from self-employed drivers without altering them, was eligible to use the scheme.
This matters because TOMS allows VAT to be applied only to the operator’s margin. It can significantly reduce the VAT payable when compared to standard VAT treatment on the full fare. The effect is already drawing attention from other operators in the industry.
Eventually, the ruling won’t just apply to Bolt. It sets a precedent. Any PHV or taxi operator that contracts directly with passengers, supplies the journey in its own name, and uses third-party drivers could now review whether TOMS applies to their model.
However, not all operators will qualify. Key conditions must be met. The service must be for the benefit of a traveller, be bought in from another party, and not be materially altered before resale. The supplier must also act as principal, not as an agent.
TOMS was designed to simplify VAT treatment for cross-border travel and package deals, where multiple services are bundled. Over time, its application has expanded, and the Bolt ruling has confirmed that the definition of “travel services” includes on-demand transport booked through apps.
The practical effect of this development could vary. App-based operators like Uber and FREENOW may look to apply the scheme. Traditional minicab firms structured differently may not meet the threshold. For black cab operators and sole traders, TOMS is unlikely to be relevant unless they operate through platforms acting as principals.
This ruling may also prompt HMRC to review its VAT guidance and enforcement strategy. If more operators begin using TOMS, the revenue impact could be considerable.
