VAT AND PRIVATE HIRE
The fact that HMRC is in litigation with Bolt confirms that it does not agree with the extension of a VAT scheme for Tour Operators (the Tour Operator’s Margin Scheme or “TOMS”) to the private hire sector.
WHAT CAN I DO?
A brief recap on the current situation. Why are private journeys in a minicab like Schrodinger’s cat, both subject to VAT and VAT free at the same time?
• The fare paid for a journey in a vehicle that carries less than ten passengers is subject to VAT.
• Unless you either employ the driver or the driver has worker status, you will be their agent and they will be liable to pay any VAT to HMRC.
• The VAT registration threshold at which a self- employed driver must register for VAT is £85,000 per year.
• As private hire drivers typically earn less than £85,000 per year from their self-employed business activities, they do not need to register for VAT.
• Private hire journeys are therefore both subject to VAT and VAT free at the same time!
As the cat is now out of the bag, hoping that nothing changes does not feel like a viable option. The option to act as an agent feels less certain going forward, leading to a potential shift in VAT liability from driver to operator. What options are available?
•We are waiting for the publication of the decision in the litigation at VAT Tribunal involving Bolt and HMRC. I understand that Bolt is arguing that VAT should only be paid on the profit it earns, rather than the full fare. For most operators, this may preserve the status quo if you compare profit on the fare to the fees earned from drivers.
• There is a well publicised industry campaign to preserve the VAT free status of private hire journeys by extending zero-rating to journeys in all vehicles, not just those which carry at least ten passengers.
PHTM DECEMBER 2023
The most coherent approach I have seen is the industry drive to extend zero-rating for all passenger journeys. This approach can be an end in itself or may encourage HMT to consider a reduced rate of 5% VAT as an alternative for the sector.
At this stage, I would urge you to support any lobbying activities to preserve the status quo, namely no VAT on private journeys. I have said previously that private hire is the only form of passenger transport with VAT. There is no VAT if we travel by bus, minibus, coach, train or aircraft. There will be no VAT for a journey in a licensed hackney cab unless the driver earns more than £85,000 per year.
Private hire is a lifeline for many parts of our communities who cannot afford a car, may find it difficult to access other forms of public transport because of their personal circumstances, or simply because there is no available bus or train service. It seems grossly unfair to single out this form of transportation purely because of unrelated licensing regulations.
I mentioned in my webinar presentation that inaction leads to the Government’s preferred outcome. Now that we know that there will be a consultation exercise, this is clearly the case.
Finally, this could also be presented as an unexpected Brexit dividend. The UK could not extend zero-rating to private hire pre-Brexit, because we were bound by the restrictions of EU law. This is an opportunity to convince the Treasury and your local MP to support our local communities by providing targeted relief from VAT.
For more information, contact Jonathan Main on 07760 166 802,
visitwww.mha.co.uk or email
jonathan.main@
mooreandsmalley.co.uk
7
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84
