VAT AND PRIVATE HIRE
guided by the earlier decision in the TfL case. Two judges agreeing with each other on very similar facts may increase the likelihood of the same decision at a higher court.
3. It means all PHOs covered by the 1976 Act operate as principal with the clear implication that they are required to pay VAT on the full fare paid by the passenger.
4. There has so far been no wholesale change to licensing requirements and therefore no need for an immediate change to the payment of VAT by PHOs.
5. The announcement of a forthcoming HMT consul- tation is a direct reaction to the Sefton decision.
Pending the change in licensing requirements and perhaps also the conclusion of the HMT consultation, there is certainly no need to change the basis on which PHOs pay VAT outside London.
Bolt
In the decision published in December, it was made clear that Bolt accepts it is acting as principal, that its ride hailing services are subject to VAT, and that it is liable to account for VAT by reference to the full fare paid by the passenger. The only question for the court was the basis on which it should calculate its VAT liability.
The case was decided by Judge Greg Sinfield, the President of the First-tier Tax Tribunal. Judge Sinfield agreed with Bolt, that it should pay VAT using the Tour Operators’ Margin Scheme (“TOMS”).
This means Bolt pays VAT on its gross margin, being the margin between the fare paid by the passenger and the amount retained by the driver. This is a significant victory for Bolt.
A few months prior to the Bolt decision, Judge Sinfield heard a case (Sonder Europe) concerning the supply of serviced accommodation and reached the same decision, that TOMS should apply to the calculation of the VAT due.
Key points:
1. HMRC intend to appeal. 2. HMRC has already appealed Sonder Europe and the appeal will be heard in December 2024.
3. The President of the Tribunal has made two high profile decisions, which may increase the chances of success by the taxpayer on appeal.
4. Unless a PHO is based in London or is already acting as principal, the Bolt decision has no immediate impact. The PHO should continue to act as agent and pay VAT in accordance with HMRC guidance.
PHTM JANUARY 2024 What about Uber?
I understand that Uber is due to take a VAT case to the Tribunal in the first half of 2024 and that it will also argue that it should pay VAT using TOMS.
I am not foolish enough to guess the outcome of a case without being involved in it and certainly not before the hearing. It’s much easier to read the decision and then decide whether I agree with it! There are though a few interesting points to bear in mind:
1. Bolt and Uber are being heard separately. The courts are keen to save time and resource either by joining similar appeals together or agreeing a lead case. I assume that did not happen here, because they are not similar enough.
2. Judge Sinfield accepted that the Bolt drivers were “independent contractors”.
3. Following Uber v Aslam, Uber’s drivers are workers. 4. It is well established that an employee cannot provide services separate to their employer whereas a self- employed person is subject to VAT in their own right.
5. There is no established UK case law or HMRC guidance on the VAT status of a worker and whether they are akin to an employee. This may be a key issue to decide at the Uber hearing.
These points may not be sufficient for the Tribunal to reach a different conclusion. They are at least sufficient not to just assume Uber wins, because Bolt won.
In conclusion
• If you operate in London, Bolt is good news if your drivers are “independent contractors”. Far from settled, as HMRC will appeal but at least a step in the right direction. You might like to think about a protective claim for overpaid VAT which will be paid out if Bolt succeeds at a higher court and your facts are sufficiently similar.
• If you operate in the rest of England & Wales, carry on acting as agent if you can and it suits your business.
• Keep the pressure on to secure the zero or a reduced rate of VAT for private hire, as it is a better option compared to the uncertainty of litigation involving Bolt and Uber.
For more information, contact Jonathan Main on 07760 166 802 or email
jonathan.main@
mooreandsmalley.co.uk
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