TAXING MATTERS


The consultation offers no practical answer. This is not a technical detail - it goes to the heart of whether the proposed approach is workable at all.


Without clarity, operators face the risk of being held liable for tax they cannot collect, on income they never received, in respect of transactions they did not control.


A two-tier industry in the making


The combined effect of these changes risks creating a two-tier private hire market.


Large platforms with: l centralised payment systems l in-app fare control l sophisticated tax teams l and the ability to restructure quickly can adapt.


Smaller operators - often family businesses serving local communities - cannot.


For many of them, absorbing 20% VAT on the fare is not commercially viable. Passing it on to passengers risks pricing them out of the market. And restructuring overnight is neither simple nor cheap.


The danger is that well-intentioned tax reform ends up accelerating consolidation in the sector, pushing independent operators out while strengthening the market position of the very platforms that the policy was supposedly designed to regulate.


What can operators do?


While clarity from HMRC is still lacking, there are steps operators can at least consider. 1. Reviewing licensing arrangements


Some operators are already exploring licensing outside Transport for London, where the regulatory framework does not automatically treat the operator as the principal.


While this is not a universal solution, it may provide greater flexibility in how services are structured and how VAT liability is assessed. Any such move must, of course, comply fully with local authority licensing rules.


2. Re-establishing the agency model


Uber’s own response to adverse rulings is instructive. Following the Supreme Court decision, Uber


PHTM JANUARY 2025


restructured its model to emphasise its role as a booking agent rather than a transport provider - with drivers contracting directly with passengers and Uber charging a service fee.


Smaller operators may need to consider similar steps: l clearer contractual terms l transparent agency relationships l explicit separation between fare and commission


l and robust documentation showing the operator does not supply the journey


While this does not guarantee immunity from HMRC challenge, it strengthens the argument that VAT should apply only to the operator’s commission, not the full fare.


3. Reviewing payment flows


Operators may also need to reconsider how payments are taken.


If the operator processes card payments, HMRC is more likely to argue that it controls the supply. Where payment flows directly to the driver, the argument for agency is stronger - though still not settled.


Clear audit trails, driver agreements, and passenger terms will become increasingly important.


The need for clarity - and consultation that listens


The private hire sector is not asking for special treatment. It is asking for clarity, consistency and recognition of how the industry actually operates.


HMRC’s current approach appears to assume that what works for Uber works for everyone. It does not.


Without clearer guidance, the industry faces years of uncertainty, inconsistent enforcement, and potentially damaging retrospective claims. For smaller operators in particular, this is not an abstract policy debate - it is an existential one.


If the government wants a fair, compliant and competitive private hire market, it must engage properly with the full breadth of the industry, not just its biggest players.


Until then, operators are left navigating a VAT landscape that feels increasingly shaped by case law, not common sense.


11


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