Taxi Driver Online

AKHTAR HUSSAIN (T/A CROSSLEYS PRIVATE HIRE CABS) (Appellant) v CUSTOMS & EXCISE COMMISSIONERS (Respondents) (1999)

V&DTr 30/7/99

TAX - AGENCY - CUSTOMS

VAT : VALUE ADDED TAX : OUTPUT TAX : TAXI FIRM : SELF-EMPLOYED DRIVERS : ACCOUNT WORK : CREDIT : CASH WORK : AGENT : PRINCIPAL : SUPPLY OF SERVICES : S.5(2)(B) VALUE ADDED TAX ACT 1994 : BEST JUDGMENT

There were differences between a taxi firm's cash work and its account work such as to make the firm liable for output tax in respect of the latter, even where drivers were self-employed.

Taxpayer's appeal against an assessment of tax in respect of work undertaken by drivers of the taxi firm which the appellant ran as sole proprietor. Most of the drivers were self-employed and provided their own cars. Most work was cash generated, whereby the drivers accepted a cash job and the financial transaction was solely between the driver and the customer. The driver kept the whole fare, and the firm merely made an entry in a log book. The driver bore the loss of non-payment, but the appellant became involved in any complaints. The appellant charged drivers a weekly rent for the use of his services, and kept a rota of drivers whereby after a driver was given a job his name would go to the bottom of the list of available drivers.

The Commissioners accepted that the appellant operated as agent for cash work and that the fares charged by drivers were taxable supplies of services, not chargeable to the appellant. However, the firm also obtained some work from account customers and it was in respect of this work that the disputed assessment had been made. Customers pre-paid for books of tickets at a reduced rate, which were handed to the driver and then on to the appellant. In return for accepting the reduced rate, the drivers were given additional work and/or put to the top of the rota. The Commissioners contended that the relationship between the appellant and the drivers differed between cash and account work and the appellant operated as a principal in respect of account work.

Five factors were taken into account in making this assessment: (i) the appellant bore the risk of bad debts in that drivers were allowed to reduce their weekly rent in respect of sums due to them for account work, before invoicing the account customers; (ii) the appellant allowed discounts to account customers and bore the loss of this; (iii) the appellant set the fares for account work; (iv) the appellant recorded all account work; and (v) the roster ensured adequate cover for cash and account work. The appellant contended that there was no difference between cash and account work, relying on Triumph & Albany Car Service v Customs & Excise Commissioners (LON/80/115) (Unreported) and F G Carless v Customs & Excise Commissioners (1993) STC 632.

HELD: Following the guidance on agency in Customs & Excise Commissioners v E Johnson (1980) STC 624, it was a question of fact as to what relationship pertained. Although there were some features which were common to account and cash work, it was accepted that the five factors identified put the account work in a different category. By s.5(2)(b) Value Added Tax Act 1994, "anything which is not a supply of goods but is done for a considerations... is a supply of services", and by putting a driver to the top of the rota on accepting a reduced value job, the appellant made a supply of service to the driver and was liable to output tax. In the two decisions relied upon, the taxi firms were found to be agents for the driver for both cash and account work, and no differences were found between the two types of work. It was not in dispute that the Commissioners had used their best judgment in raising the assessment.

Appeal dismissed.

Mrs L E Manson VAT Consultant of the TACS Partnership for the appellant. Mr H Sharkett of the Solicitor's Office of HM Customs & Excise for the respondents.
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