VAT AND PRIVATE HIRE
UBER’S CHALLENGE TO THE LICENSING OF PRIVATE HIRE OPERATORS FINALLY RUNS OUT OF ROAD
Article by Jonathan Main VAT Partner, MHA
What does this mean for private hire operators’ VAT bills?
Who should read this?
Anyone with an interest in the VAT obligations for private hire operators (‘PHOs’).
The Supreme Court handed down its judgment in the case of D.E.L.T.A. Merseyside Limited and another (Respondents) v Uber Britannia Limited (Appellant) [2025] UKSC 31 on 29 July 2025. This article summarises the implications of the decision from a VAT perspective.
The decision
Uber sought the Supreme Court’s agreement that PHOs regulated by Part II of the Local Government (Miscellaneous Provisions) Act 1976 (‘The 1976 Act’) are required in all cases to contract as principal for the
journey booked by the passenger. The 1976 Act governs the licensing requirements for PHOs based outside London and Plymouth.
Uber failed to convince the Supreme Court, which agreed with the ruling from the Court of Appeal in July 2024. In short, PHOs licensed under the 1976 Act can continue to choose whether to use an agency or principal contracting model for journeys booked by passengers.
The VAT implications
HMRC VAT Notice 700/25, “How VAT applies to taxis and private hire cars”, provides VAT guidance for the private hire sector. The VAT Notice makes it clear that PHOs can act either as agent or principal in providing private hire journeys to passengers.
l As principal: the PHO is required to pay VAT on the full fare paid by the passenger.
l As agent: the PHO accounts for VAT on the fees charged to drivers for providing access to passenger bookings, together with any fees for other services, such as vehicle rental.
For agency work, the driver: is responsible for paying VAT on the fare paid by the passenger. If drivers earn more than the £90,000 VAT registration threshold in any 12 month period, they should register for VAT.
The Supreme Court decision preserves the status quo under the 1976 Act and PHOs outside London can continue to choose the contracting model that best suits their business.
ON PRIVATE HIRE FARES
6
Unfortunately, this is not the end of the story. PHOs licensed within London are regulated by a later, differently worded but similar scheme, under the Private Vehicles (London) Act 1998 (‘The 1998 Act’), which requires all journeys to be contracted as principal with operators liable for VAT on the full fare paid by the passenger.
This discrepancy between the 1976 and 1998 Acts leaves open the very unsatisfactory possibility of VAT
SEPTEMBER 2025 PHTM
VAT
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