The Campaign for Zero-Rate VAT on Private Hire Journeys
The private hire industry is experiencing a crossroads moment. The recent high court ruling, in the Uber vs. Sefton Council Case, has set the stage for a 20% VAT charge on private hire fare.
This has sparked industry representatives to start a campaign to get the government to change the legislation so that private hire is given the same zero-rate tax as other forms of public transport.
How did we get here?
This story stems back to 2021, when Uber lost a case in the high court over the classification of their drivers as workers. As a result, Uber was forced to change its business model, contracting directly with passengers rather than an agent. This left Uber liable for VAT and they received a huge back-dated bill from HMRC.
The Uber vs. Sefton Council Case
Following this case, Uber then sought a declaration from the High Court to confirm that all private hire operators in the UK should be subject to the same rules. This was opposed by several regional minicab firms, alongside Sefton Council. They argued that it could damage the industry, particularly smaller operators who would be forced to raise fares.
In a landmark ruling, Uber won the case against Sefton council and operator coalition, establishing that passengers must pay VAT on private hire journeys. This case set the stage for the current campaign.
The Case for Zero-Rate VAT
Industry representatives argue that a zero-rate VAT on private hire journeys would prevent fare increases and protect smaller operators.
They also point out the social impact. Private hire services are predominately used by vulnerable individuals, like the elderly or disabled, or those without personal transport. Higher fares would disproportionately impact these individuals
The campaign also reignites the debate of whether taxi and private hire services should be classed as public transport. They are a necessary link in local transport infrastructure, particularly in remote or rural areas, with poorly serviced public transport.
However, skeptics argue that the VAT changes will have little to no effect on the industry. A spokesperson from the National Private Hire and Taxi Association (NPHTA) downplayed the impact of the ruling, stating:
"In truth, it will have little to no effect on the industry at all.”
“Those who are registered for VAT have already been paying, those are under the threshold will not be affected at all, since it was not a VAT case, in fact in both the Sefton case and the London case, the judges both clearly stated that VAT was not relevant nor was it argued in the cases.”
What's Next?
The campaign is far from over. With pending court cases and potential government intervention, the landscape could change dramatically in the coming months.