VAT AND PRIVATE HIRE
• The government will not implement any changes until the eventual outcome of the Sefton appeal.
These points are confirmation that the authors of this document are:
• Not in favour of zero-rating for PHV transportation.
• Not in favour of changing PHV licensing regulat- ions so that drivers contract directly with passengers.
• Regard the Sefton and TfL judgments as confirming that PHVOs are required to pay VAT, even though they are not VAT cases.
The options explored in the consultation
In my December article for PHTM, I made the following statement about the announcement of the consultation in the Autumn Statement, “think of a consultation process as the starting pistol being fired at the beginning of a race. Unfortunately, this could be a sprint, rather than a marathon. In my experience the government typically issues a consultation when they have already decided on their preferred outcome.”
Chapters six and seven contain details of eight options to mitigate the effect of paying 20% on all agency fares. However, only one of the eight options is given any serious consideration by HMRC. The following options are either explicitly rejected or dismissed by not being explored in any depth.
1. Changing licensing law to allow drivers to contract directly with passengers.
2. Amending VAT law to allow for a legal fiction that drivers contract with passengers, despite licensing laws to the contrary.
3. Reduced rate or zero-rate for PHV transportation.
4. Introduce a VAT zero rate for demand responsive transport (“DRT”) services.
5. Widening the scope of disabilities that qualify for the disabled person’s bus pass.
6. Increasing the bus service operators grant (“BSOG”), which is a grant paid to operators of eligible bus services and community transport organisations to help them cover some of their operating costs.
7. Provide additional funding for local government and charities to provide alternative travel support for vulnerable groups through community transport schemes such as DRT, Dial-a-Ride, Shopmobility, door-to-door minibuses, taxi provision to and from school, and community group car schemes.
PHTM MAY 2024
VAT CONSULTATION SEMINAR at PHTM EXPO on Wed 15 May, 1pm
VAT Treatment of PHVs With expert analysis by:
Jonathan Main, VAT Partner, MHA and Gary Jacobs, CEO, Eazitax
7
The only option to survive is a margin scheme specifically designed for the PHV sector. The government is at pains to point out this margin scheme is not the Tour Operators Margin Scheme (“TOMS”). It is in fact in all material operational respects, identical to TOMS. The only difference is it is voluntary, whereas TOMS is mandatory.
The most obvious change from an agency model to a margin scheme is the collection of fare data from drivers, so the PHVO can calculate the profit liable to VAT. I know from discussions with operators, that will require a major change to the relationship with drivers and the accounting systems required to support the change.
What do I do now?
I have said steady as she goes so many times, I feel like I’m on the deck of a ship. That is still the best advice. We now need to wait for:
• The outcome of the consultation process, • The outcome of the Sefton case,
• The announcement of any changes to VAT law and guidance, and
• Potentially further progress in the Bolt and Uber VAT cases.
If the Sefton case is heard by the Supreme Court, that will take us to 2026 before we see any revised legislation from HMRC. If the case is finally decided at the Court of Appeal, we may see some progress next year.
In the meantime, please engage with the consultation process, with a particular focus on the operational issues with a margin scheme, as it is the only horse left with a rider.
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