VAT AND PRIVATE HIRE
AN UPDATE FROM THE AUTUMN STATEMENT ON 22 NOVEMBER 2023
Article by Jonathan Main VAT and Indirect Taxes Partner MHA Moore and Smalley
Jonathan Main is a VAT and indirect taxes partner at MHA and leads the practice across the North of England. He has a particular interest in the field of transport and has closely followed the developments regarding VAT and the private hire sector.
The future VAT treatment of private hire revenue was brought into sharp relief by the recent judgment in Uber Britannia Limited v Sefton Borough Council [2023] EWHC 1975 (KB
WHY SHOULD I READ THIS?
In my last article, I discussed the implications of the Uber v Sefton Council High Court decision on the private hire sector. Uber succeeded in convincing the court that English and Welsh private hire operators (“PHOs”) outside London should be licensed as principals with the implication that PHOs would need to pay VAT on both account and private journeys. This would be a fundamental change for the industry, affecting profits in the sector and the financial viability of operators.
The parties to the case have sought leave to appeal the High Court decision and to be granted an injunction against any local authorities changing their licensing arrangements until the conclusion of the litigation.
Given the request for the case to be referred to the Court of Appeal and the potential injunction to prevent local authorities pre-empting the outcome of the case, my advice at the time was “steady as she goes”. HMRC’s guidance has not changed, and you can therefore continue to act as agent for private journeys.
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Although this position has not changed in the short term, there is now an issue which I believe requires your urgent attention.
Buried in Page 95 of the Autumn Statement which was published on 22 November, HM Treasury (“HMT”) made the following announcement: “VAT Treatment of Private Hire Vehicles – The government will consult in early 2024 on the impacts of the July 2023 High Court ruling in Uber Britannia Ltd v Sefton MBC.”
WHY DOES THIS MATTER?
Think of a consultation process as the starting pistol being fired at the beginning of a race. Unfortunately, this could be a sprint, rather than a marathon. In my experience HMT typically issues a consultation when it has already decided on its preferred outcome.
For example, the two most recent HMT consultations published in September and November 2023 invited views on draft legislation designed to implement its preferred outcome. From HMT’s perspective, a consultation is a chance for it to stress test the preferred future tax treatment, rather than invite ideas on a potential way forward.
It is far easier to influence the content of a consultation than to derail a process which is already underway. I have observed the progress of, or been involved in, many consultations over the last 30 or so years in the profession and can only recall one high profile consultation in the education sector, which ran aground once it became clear that HMT had failed to reconcile opposing views in the sector.
I have spoken to operators, industry experts, and presented at a recent industry webinar. I have heard widely differing views on the future for the industry, which leads to the inevitable conclusion that not everyone, including me, can be right!
DECEMBER 2023 PHTM
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