VEEZU: VAT TREATMENT OF PHVs
VAT REFORM MUST NOT LEAVE TRADITIONAL OPERATORS STRANDED
Article by Nia Cooper Chief Legal Officer
www.veezu.co.uk
In July, the Supreme Court delivered a unanimous and unequivocal verdict for operators across the country.
The ruling
confirmed that operators outside London remain free to choose their business model, whether agency, principal, or intermediary. It stopped Uber from reshaping the sector to suit its own interests and imposing a monopoly on passengers and driver-partners alike.
Despite this landmark ruling, the cloud of VAT on PHV fares still hangs heavy over the sector. With the Autumn Budget fast approaching, reports suggest the Treasury is once again looking to private hire as it searches for ways to fill a £50 billion fiscal gap. The government held off its response to the VAT consultation on PHV fares until after the Supreme Court’s decision. While this created 12 months of uncertainty for the sector, we understood the logic. But now that the five justices have spoken clearly and unanimously, politics should not get in the way.
We are grateful to see the sector rally behind this issue, with 59 local, regional and national PHV operators coming together in a joint letter to the Chancellor of the Exchequer urging the government to provide clarity. That unity shows just how deeply this issue cuts across our industry. Providing reassurance on VAT now would remove a needless headache for both ministers and operators alike and allow the government to focus on the far bigger issues it needs to address in next month’s Budget.
That unity across the sector is all the more important because uncertainty hasn’t stopped
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others from exploiting the grey areas. What concerns us most is that, while all options remain on the table, some ride-hailers continue to apply VAT treatments that both the government and HMRC disagree with. The use of the Tour Operators Margin Scheme (TOMS) by large multinationals undermines the competitiveness of the market and could see the collapse of hundreds of small to medium-sized British-founded and based companies. If the so-called “Taxi Tax” would have been a blunt hit, TOMS is a slow squeeze - less visible, but every bit as damaging.
TOMS and the risk of distortion
Whether TOMS is applicable for use on PHV fares is currently subject to a legal process. In March this year, the Upper Tribunal’s decision in HMRC v Bolt Services UK Ltd upheld Bolt’s right to use TOMS.
The government’s consultation on the VAT treatment of PHV fares proposed a specific margin scheme for the sector as a potential solution to the current VAT challenges. Veezu had supported this approach, provided that it is developed in a way that preserves the legal clarity on business models established by the Supreme Court’s unanimous ruling in Uber v Sefton, is applied uniformly across the sector, and allows all operators sufficient time to implement the necessary administrative changes.
The immediate risk is that the government imposes 20% VAT on PHV fares while the application of TOMS remains unresolved and subject to a lengthy legal process. Under such circumstances, multinational platforms using TOMS would continue to pay VAT only on a reduced margin, whereas British-founded and based operators would face significantly higher costs due to the 20% increase in fares. This would risk entrenching the dominance of global tech giants at the expense of British businesses and further distort competition across the sector.
NOVEMBER 2025 PHTM
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