VAT AND PRIVATE HIRE
DELTA MERSEYSIDE LTD & VEEZU HOLDINGS LTD VERSUS UBER BRITANNIA LTD
Article by Jonathan Main VAT and Indirect Taxes Partner, MHA Tel: 07760 166 802 or email:
jonathan.main@
mha.co.uk
What is the issue?
The Court of Appeal issued its decision in DELTA Merseyside Ltd & Veezu Holdings Ltd v Uber Britannia Ltd (“DELTA”) on 15 July 2024 and overturned the previous ruling in the High Court.
This presents a problem for HM Treasury and HMRC. At face value, the VAT treatment of income earned by a private hire operator (“PHO”) now relies on a patchwork of UK licensing regulations, rather than VAT legislation. There are many instances in primary VAT legislation which rely on third party statute to establish the boundaries of VAT exemptions or zero- rating.
By contrast, there is no precedent for third party statute to dictate the amount of VAT payable in different parts of the UK, based on similar or identical business models.
HMRC guidance
HMRC’s guidance for PHOs and self-employed drivers can be found in VAT Notice 700/25. In summary, if the customer makes payment directly to the driver, it is typically the driver that makes the supply and bears the liability to account for VAT. As drivers’ earnings are typically below the VAT registration threshold of £90,000 per year, this income will not be liable to VAT.
The PHO will charge the driver an access fee, either fixed or commission based. This income will be subject to VAT but will only be a proportion of the income earned by the driver.
22 Licensing regulations
There are several distinct versions of licensing regulations in the UK. The overarching themes are broadly the same, in that they seek to ensure the safety of passengers who take journeys in private hire vehicles. The variations are the cause of the potential VAT headache.
Each set of regulations requires three types of licence:
• The vehicle itself must be licenced to be used as a private hire vehicle.
• The driver must hold a private hire vehicle driver’s licence.
• An operator’s licence must be held by anyone accepting bookings for private hire journeys.
With a focus on the DELTA judgment, the key differences are as follows:
London
In London (“The 1998 Act”), “Operator” is defined as “a person who makes provision for the invitation or acceptance
of, or who accepts, private hire
bookings” and “Any reference in this Act to the operator of a vehicle which is being used as a private hire vehicle is a reference to the operator who accepted the booking.”
England and Wales
The regulations in force in the rest of England and Wales (“The 1976 Act”) have broadly the same idea of an operator but word this differently:
“For the purposes of this Part of this Act every contract for the hire of a private hire vehicle licensed under this Part of this Act shall be deemed to be made with the operator who accepted the booking.”
SEPTEMBER 2024 PHTM
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