HMRC VAT CONSULTATION THE CONSULTATION ON VAT
The consultation goes on and remains important for the industry as a whole.
Don’t get too comfortable as we do not yet know if Uber will seek to appeal the decision again (up to the Supreme Court) and if the Supreme Court would let them, we also know that the overturning of the judgment only relates to the 1976 Act which governs licences across England and Wales but doesn’t include London or Plymouth.
The Government, as far as we are aware, remains committed to the consultation and it will still have the potential to impact the industry.
The consultation makes a number of suggestions for ways in which the Government could ease the burden on individuals and businesses where VAT is imposed on private hire journeys (this includes what the government refers to as “account work”, journeys carried out by companies that choose to contract with customers (like Uber) and also on all journeys inside London).
However, those suggestions are born out of
assumptions which in our view are incorrect. The Government has invited feedback on those assumptions and on its proposals.
To highlight just one assumption; the consultation calculates that only a third of private hire operators are operating under an agency model (i.e., those that don’t charge VAT) and therefore for the average person there will only be an increase of £2.70 to £5.60 per year if VAT is added to all fares.
Our understanding is that the agency business model (those not charging VAT) is far more widespread than one third.
We also understand that the £2.70 to £5.60 per year (partly based on the assumption that two thirds of passengers already pay VAT) is incorrect and that some passengers rely heavily on private hire and will pay much more every year if they have to pay 20% more whereas some members of the public never use private hire so will be unaffected; there is no such thing as an average passenger.
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We will only know if the assumptions made in the consultation are correct if there is a big response to the consultation. Smaller operators in particular typically use the agency model and if they do not respond then it will be considered that the assumption that only a third of private hire operators are using this model is correct,
and therefore the impact will be underestimated.
Data about operators’ business models and passengers needs to be fed into the consultation to ensure the impact is understood by those who are considering the changes before it is too late.
At this time, we know the government confirmed it would be watching and considering the appeal, we do not know what effect that will have on the consultation.
Moving forward, we would urge everyone in the private hire industry – from drivers to operators to suppliers – to have their say (even if this is to confirm that no change is required providing the outcome of the Court of Appeal is upheld). Should the government introduce changes (as it has said it is committed to) it could potentially be industry-defining, so it’s important to engage and make your voice heard.
The time it takes to complete the response pales into insignificance compared to the years of completing tax returns and the headache of collecting VAT from passengers to pay over to HMRC.
Share your views and respond to the VAT consultation here:
https://shorturl.at/yOcCu
Responses should be sent by8 August to:
phvovatconsultation@hmrc.gov.uk
For any queries about the consultation or for help completing the form, our team would be happy to
enquiries@aaronandpartners.com AUGUST 2024 PHTM
help. Please email:
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