VEEZU: VAT TREATMENT OF PHVs
WHY WE MUST CONTINUE TO FIGHT FOR A LEVEL PLAYING FIELD!
Article by Nia Cooper Chief Legal Officer
Veezu
www.veezu.co.uk
It was hard not to feel a sense of enormous pride when the Court of Appeal ruled in favour of Veezu and DELTA Taxis and overturned the July 2023 High Court ruling that would have had devastating effects on the private hire vehicle (PHV) industry.
You always take a risk, both professionally and personally, when you decide to take on such a significant undertaking. However, in my mind, the reward, if we succeeded, far outweighed the risk of accepting a situation that could cause damage to many, many people, communities and the traditional private hire trade that I’ve grown so very proud of.
The Court of Appeal’s decision has far reaching implications and means that self-employed driver partners and operators can continue to earn an income, and those passengers, who have little to no access to public transport, can still move around.
In many ways, it was a victory for the entire industry and all of those associated with it - local licensing authorities, dispatch software companies, suppliers and aggregators.
THE IMPACT OF THE DECISION
You will often hear businesses and investors ask the government to provide consistency, stability and certainty. While these all sound sensible and reasonable they are not always easy to deliver in what is a very complex, interlinked environment. When the High Court ruled in favour of Uber in July 2023, 50 years of consistency, stability and certainty were disrupted in a single moment.
This decision on the interpretation of a few sentences in legislation had implications that went well beyond the intended ruling. While this was positioned as a
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ruling on PHV licensing, those few sentences included terms that reached beyond licensing legislation and into tax regulation. Not only was the consistency, stability and certainty of the licensing regime disrupted, but the way VAT is applied on fares became an area of dispute.
In the worst-case scenario, the High Court ruling would have increased PHV fares by 20%. This would have priced out low-income passengers who rely on PHVs, reduced overall demand for bookings and led to self- employed driver partners leaving the industry.
With this threat hanging over us, we lobbied the Government on the VAT status of PHV fares so that we could try to restore the consistency, stability and certainty back to the market. We were also keen to highlight the disparity in the way VAT is treated in the PHV industry versus other modes of public transport.
For the majority of our users, PHV is part of the public transport network and provides the only mode of transport available 24/7; however, it does not enjoy the zero-rated VAT status given to all other modes of public transport. We were very pleased when the Govern- ment agreed to publish a consultation on the way VAT is treated in the PHV industry and set out several policy levers and mitigating measures to lessen the impact of the High Court Ruling.
While the Court of Appeal has restored the 50-year status quo, the fight is not yet over. Uber can seek an appeal through the Supreme Court, so we could end up back where we were in one to two years’ time.
Therefore, it is important that all operators respond to the government’s VAT consultation by the 8th of August deadline. That way the government will be better informed about the business models in the industry, how many PHV operators act as principal and/or agents and what our collective views on whether and how VAT should be applied on fares.
We have a chance to share our voice, so let’s not pass it up.
AUGUST 2024 PHTM
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