BOLT 2 HMRC 0
Article by Jonathan Main VAT and Indirect Taxes Partner, MHA
jonathan.main@
mha.co.uk
Bolt Services UK Ltd (“Bolt”) has successfully defended the VAT liability of its services in a decision of the Upper Tribunal (“UT”) released on 24 March 2025. If you are a private hire operator (“PHO”), this insight explains the implications of the UT decision and the future for VAT across the UK.
The court decision
The most significant facts of the case, as summarised in the UT decision:
“From 1 August 2022, Bolt has acted as principal in the re-supply of passenger transport by private hire vehicle (“PHV”), which it buys from self-employed PHV drivers and re-supplies to its customers. Bolt contracts separately with both drivers and passengers and is responsible for all invoicing and payments. There is no contractual relationship between the drivers and the customers. The PHV drivers are independent contractors. They are free to provide PHV transport independently of the platform, including to Bolt’s competitors.”
To coincide with this change, Bolt implemented a VAT structure known as the tour operators margin scheme (“TOMS”), which reduced its VAT bill from the full amount paid by the customer to the margin between the amount paid to the driver and the amount charged to the passenger. TOMS is a VAT scheme most commonly used by tour operators to manage the VAT payable on package holidays.
HMRC unsuccessfully challenged this arrangement at the First-tier Tribunal (“FtT”). Following their defeat, HMRC lodged an appeal to the UT. This latest decision represents a further comprehensive defeat for HMRC. In short, the UT endorsed the decision of the FtT and confirmed that Bolt supplied travel services to its customers, which should be taxed by reference to the margin between the payment to the driver and the fare paid by the passenger.
How did we get here?
This is the latest refueling stop in a taxi ride which began in 2021 at The Supreme Court, concerning the worker status of Uber drivers. We have since driven past a London landmark on TfL licensing requirements for PHOs, again with Uber at the wheel. The Uber journey is headed back to The Supreme Court for a
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second time in July 2025, this time to determine the licensing requirements for PHOs outside London.
The Uber litigation about worker status and particularly licensing requirements has caused London centric operators to rethink their VAT status, as TfL requires operators to act as principals not agents when passengers use their ride hailing services. This decision will be a huge boost to Bolt and potentially any other operator licensed by TfL, which operates its business on the same basis.
What next?
Readers may recall that HM Treasury (“HMT”) issued a consultation in April 2024 on the future VAT liability of private hire journeys in the UK. HMT have confirmed they will publish the outcome of the consultation following publication of the Supreme Court decision. As the hearing is scheduled for July 2025, we expect the decision in Autumn 2025. In the meantime, PHOs licensed by local authorities other than TfL can continue to act as agents for cash (non-account) journeys for passengers. In the event that a private hire driver earns income above the VAT registration threshold, the driver not the PHO is required to pay VAT.
In our view, the most likely outcome of the HMT consultation is the introduction of a sector wide and UK wide margin scheme similar to TOMS.
What should I do now?
If you are only licensed by TfL, this is good news, although of course HMRC may try to take the case to the Court of Appeal. You should think about TOMS and how it applies to your preferred business model. If you are only licensed outside London, the Bolt decision should not affect your business model. Longstanding HMRC guidance on agency status for cash journeys should mean you need only account for VAT on the commissions or fees charged to drivers.
If you have operator licenses both within and outside London, the Bolt decision may provide you with a basis to rethink your business model across the UK.
VAT due on account business is unchanged by these arguments.
We can help
We can help you to assess the future profitability and required operational structure of your business based on a number of outcomes. This will range from VAT due in full on all fares to use of TOMS or a similar margin scheme.
APRIL 2025 PHTM
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