VAT TREATMENT OF PHVs
UBER v SEFTON RULING AND THE IMPORTANCE OF THE GOVERNMENT’S VAT CONSULTATION
Layla Barke-Jones Dispute Resolution Partner Aaron & Partners
www.aaronandpartners.com
THE UBER -V- SEFTON COUNCIL CASE
Probably the single most significant issue for the private hire trade of the past year has been the fallout from the landmark judgment ruling in the Uber vs Sefton Council case. The initial decision was handed down by a judge a year ago which sent the industry into a spin over whether VAT would need to be added to all private hire journeys.
The government launched a consultation in the wake of the initial judgment confirming it (and so HMRC) would now force all operators to charge and collect VAT, raising prices by 20%. Such a step would have been hugely damaging, especially amid the cost-of- living crisis, presenting significant problems for businesses and drivers.
But there’s good news to report. For this month, we’ve seen a victory for the industry – that will see the proposed 20% fare hike cancelled.
That’s because the Court of Appeal has allowed an appeal from private hire operators, led by Delta Merseyside and Veezu, to overturn the landmark ruling that went in favour of Uber over contract terms for operators.
So, just to recap what’s happened so far in this case, here’s what it’s all about…
In March 2021, Uber was forced to raise its prices after the court ruled its drivers were now viewed as workers, rather than simply agents.
Uber rallied against this in London and lost, then chose to bring a major lawsuit against Merseyside-based Sefton Council over contract terms for all operators outside of London. In November 2022, the High Court heard the case and in July 2023 the judge ruled that
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operators must contract with passengers. Despite the intervention of the private hire operators, warning of a potential consequence leading to passengers having to pay VAT on private hire journeys, leading to potential fare hikes of 20%, the judge sided with Uber.
Since this meant operators could no longer act as agents of self-employed drivers anywhere across England and Wales (except Plymouth) the Government launched its consultation on possible options to avert the addition of VAT to all journeys.
Whilst some private hire companies, like Uber, do charge their passengers VAT, it has always been down to the individual operators to decide which business model to use, the HMRC guidance made clear that the model used would dictate whether VAT would apply. The decision secured by Uber in the case of Uber -v- Sefton Borough Council took that choice away from the operators and from passengers.
As well as the fare increase heavily impacting the public amid the cost-of-living crisis, it was also set to place significant administrative burdens on operators. It was anticipated that forcing operators to change their business model would force a large number of them out of business. It was feared that vulnerable groups who are regular users of private hire services, including the elderly and disabled, would be particularly affected.
Following the ruling, during his Autumn Statement, the then-Chancellor announced the Government would launch a consultation, which continues to run until August 8 to address the issue.
THE APPEAL
The judgement was also challenged by a group of operators led by Delta Merseyside and Veezu, to maintain the safety that the licensing regime provides and promote fair and open competition for private hire businesses. A decision announced on 15 July 2024 by the Court of Appeal overturned the previous one. It means passengers will not now face inevitable 20% fare hikes and private hire operators in England and Wales outside of London will not have to grapple with
AUGUST 2024 PHTM
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