NO TAXI TAX!?
The Government has confirmed that the 2 January 2026 VAT legislative change does not affect PHV operators acting in a disclosed agency capacity. This appears to open the possibility for PHV operators to implement an agency model outside London, alongside the principal model for Greater London. HMRC may challenge these arrangements if they are not properly implemented, so any change to the business model will need to be implemented in a very clear, consistent and robust way.”
Industry urged to review contracts
Layla Barke-Jones, Dispute Resolution Partner at Aaron & Partners, said:
“The Budget announcements do not undo the legal protections for operator business structures that we fought so hard to preserve at the Supreme Court and underlines the importance of that decision.
“Our advice to firms operating in the private hire sector, whether or not they are currently using the TOMS scheme, is to review their contractual arrangements as soon as possible to ensure compliance and implementation of the correct business model for their organisation. Businesses will need to ensure they don’t fall foul of the potential tax, regulatory and other implications by not having the correct measures and contractual arrangements in place for their intended model, today’s announcement makes that all the more important.”
LONDON – more clarity needed
The general consensus is that HMRC has failed to provide clarity for traditional PHV operators in Greater London. Many now say they are more confused than ever about where they stand and what these new rules mean for them.
Prior to the consultation response, no guidance was given by HMRC as to whether the TfL licensing requirement that operators are principals, was the same use of the word principal used in the VAT 700/25 notice about the business model of Principal and Agent for VAT. Many TfL operators took the view it was a bad use of the word and for licensing they had always operated as principal for the service but not for payment.
PHTM DECEMBER 2025
The VAT consultation response now suggests the principal term is used for both service and payment with London operators acting as the PRINICIPAL on all passenger fares.
Are HMRC really suggesting a two tier VAT system? - one for PHV fares in London and another for PHV fares outside London, with London operators charging VAT on cash fares, where self -employed drivers who are not VAT registered, are paid directly by the passenger. How is this money going to be accounted for and who is going to collect it from the drivers?
Gary Jacobs CEO of EAZITAX said: “Unfortunately we still need clarity.
“We don’t need to talk about the big players both inside and outside London, Sefton and the recent the governments declaration on TOMS is clear.
“What we need to do is seek clarity for the small to medium private hire London operators, who absolutely are ‘agents’. They typically earn commission paid from drivers, the money is collected and passed on by the operator or collected by the driver.
“Are they subject to collecting VAT on fares? How does HMRC think they are going to collect it? Who do they think is going to administrate it?
“It feels like the consultation hasn’t dealt with the complexity or reality of SME operators.
“The Budget announcement mentioned VAT on fares incidentally whilst actually making The Toms declaration which only affects larger entities.
“Can a government support a two tier system of taxation in this country? The subject I think may become a legal minefield…..”
Conclusion
In short, nothing changes for most, although more clarity is needed for traditional London operators, but for ride–hailing apps the VAT clock is ticking.
With the implementation date of January 2026 the PHV sector now enters a critical period of restructuring as firms assess how the government’s decision will reshape the competitive landscape for all our industry.....
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
