VEEZU: VAT TREATMENT OF PHVs VAT treatment of PHVs
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industry, it is time to put these differences aside and back one solution.
PHVs are a vital transport service, representing the only transport option for many vulnerable passengers. Recognising this, Veezu’s submission to the consultation strongly advocated for PHVs to be classed as public transport, and for their fares to be fully exempt from VAT. PHVs are the only safe, reliable and cost-effective mode of transport available 24/7. However, applying a full 20% VAT to fares would significantly challenge the ability to maintain services that remain both reliable and affordable.
Moreover, outside London, PHVs are even more critical, serving as a vital lifeline for many households and communities especially in remote rural areas. With the tax change, fares could become unaffordable for vulnerable low-income passengers. It could also compromise safety due to an increase in unlicensed journeys as drivers seek to earn a living outside of the regulated market.
So maybe it is time to reach a compromise. An industry specific margin scheme, which would prevent an increase of 20% to PHV fares, limiting the increase to around 3% - 5%, could be the solution that the sector and the Government can agree upon. The ride-hailers already applying the Tour Operators Margin Scheme (TOMS) could end their expensive HMRC tribunals, and if phased in over a long enough period, small to medium sized operators could ensure they can prepare for the increase in fares and administrative costs of shifting to a margin scheme.
PHTM DECEMBER 2024
The increase in fares would not disproportionately affect even the most vulnerable passengers. Demand for services is unlikely to be significantly impacted and licensed drivers would still be able to earn a living. At the same time, the Government would receive an increase in tax income.
I know that this solution may not be palatable to everyone across the sector, but the risk of not agreeing and aligning to reach a compromise is that the Government will decide for us. If the Uber v Sefton Supreme Court appeal does not fall in our favour, then there is nothing to
stop the
Government from imposing the full 20% on all PHV fares. The implications of this could be devastating.
The future of the PHV sector
I do not have a crystal ball, but the Government has made clear that it intends to address the question of worker rights through its Employment Rights Bill. The increased costs of these proposed changes have already been well documented in the media. While it was not included in the initial phases of the Employment Rights Bill, the Government intends to consult on a single status of worker towards the end of the current Parliament in five years’ time.
In both its election manifesto and since coming into power, the Labour Government has made its intentions to bring clarity to the concepts of self- employment and workers. While we do not know which definition licensed PHV drivers will fall under, if licensed drivers become classed as workers through an act of Parliament, then the costs to PHVOs will inevitably increase.
Absorbing these extra costs, plus the potential 20% VAT increase on fares will be impossible for most PHVOs. Preparing for increased worker rights, investing in new technologies and shifting to cleaner vehicles could all be made much easier if we reach a decision on the VAT treatment for PHV fares in the next six months.
You cannot always get what you want, but if you try sometimes, you get what you need.
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