VAT AND PRIVATE HIRE Add to the mix...
The VAT Tribunal in Bolt v HMRC ruled that the tour operators margin scheme (“TOMS”) applied to the supplies made by Bolt, which was therefore only required to pay VAT on the margin earned between the passenger fare and the amount retained by the driver. HMRC has appealed this decision, and we understand the case will be heard in November 2024.
Plymouth
The Regulations in Plymouth are based on separate regulations to the rest of the UK, these also require vehicle, driver and operator licences. These regulations also include a deeming provision: “For the purposes of this Act every contract for the hire of a private hire vehicle licensed under this Act shall be deemed to be made with the operator who accepted the booking.”
Scotland and Northern Ireland
The Scottish and Northern Irish regulations require certain categories of vehicle to be booked only on a licensed booking premises but do not include a deeming provision. Nor do they include a definition of “Operator”.
Case law
The High Court in Uber London Ltd v Transport for London declared that “in order to operate lawfully under the Private Hire Vehicles (London) Act 1998 a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger”.
In contrast, The Court of Appeal in DELTA held that a “deeming provision does not inevitably turn fiction into fact” and applies only to “this part of the act”; it should not therefore be construed more widely to imply that a contract had as a matter of fact been entered into between the parties.
PHTM SEPTEMBER 2024
A mess that needs fixing This is an untenable position:
• The VAT treatment of supplies in the private hire sector depends on a mixed bag of licensing regulations which are not designed to deal with VAT.
•We await the outcome of an HMRC appeal against a VAT Tribunal decision that VAT is only due on the gross profit retained by a PHO.
•We await the outcome of the Government consultation on the private hire sector, which was based on the outcome of a High Court decision, which has been overturned by the Court of Appeal.
What should I do?
Up until now, we have routinely advised our clients to follow HMRC guidance if that makes sense for the business. Outside London that would still appear to be the best option following the DELTA decision, as you can continue to pay VAT for agency work, only on the fees or commissions charged to your drivers.
However, the level of uncertainty caused by multiple challenges to the VAT treatment of private hire can of course make it hard to plan in a sustainable way for the future profitability of your business.
We can help you work through these challenges and find a sustainable and defensible position going forward.
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