Taxi Driver Online

Brendan Murray t/a Benco Taxis

Hearing Date 20 August 2001

Court Type VAT Tribunal

Court Tribunal

Judge

LADY MITTING; M P KOSTICK

SUPPLY—taxi and car hire—whether supplies to cash customers were by Appellant as principal with drivers as agents or by drivers as principals—appeal dismissed

TRIBUNAL CENTRE: MANCHESTER

DECISION NUMBER: 17334

APPELLANT: BRENDAN MURRAY T/A BENCO TAXIS

CASE REFERENCE NUMBER: (MAN/00/1051)

RESPONDENTS: THE COMMISSIONERS OF CUSTOMS AND EXCISE

TRIBUNAL CHAIRMAN: LADY MITTING

TRIBUNAL MEMBER: M P KOSTICK

LOCATION: SITTING IN PUBLIC IN MANCHESTER

DATE: 22 JUNE 2001

FOR THE APPELLANTS: MR P SMALLWOOD

FOR THE RESPONDENTS: MR N POOLE

RESULT OF THE APPEAL: DISMISSED

Decision

1. This is an appeal by Mr Brendan Murray who trades as Benco Taxis against (i) a decision of the Commissioners dated 16 March 1998 that Mr Murray acted as principal in the supply of taxi services to his customers and should therefore account for VAT on the full amount of fares earned, and (ii) the resultant assessment dated 25 May 1999 in the sum of £18,273 plus interest, subsequently amended to £16,494 plus interest.

2. Mr Murray contended that he in fact, so far as cash customers were concerned, hired his cars out to self employed drivers who themselves provided the services to the customers on their own account and Mr Murray was thus only accountable to tax on the 60% of fares for which the drivers were accountable to him.

3. Mr Murray had operated from premises at 104-106 Winwick Street, Warrington for some seven years. He registered for VAT from 1 May 1996 and originally he accounted for tax on 100% of his takings. However, following professional advice, from March 1997 onwards output tax was declared on only 60% of receipts. The amended assessment covers the period 1 May 1997 to 31 October 1998.

4. Oral evidence was given by Mr Murray and on behalf of the Commissioners by Mr Sean Coneeny.

5. The facts were as follows. During the period covered by the assessment, Mr Murray owned and operated eight private hire cars and two Hackney carriages. To drive the vehicles Mr Murray used some ten self-employed drivers. In addition, he himself did some driving as did his one employee who also worked in the office. Mr Murray's work was divided into account or contract work and cash work. The Tribunal was not concerned with the contract work as Mr Murray accepted that he acted as principal in relation to this work and that VAT was due on 100% of the takings therefrom.

6. Mr Murray held and paid for himself an operator's licence in respect of all his vehicles. No individual driver held an operator's licence. Each individual vehicle was also licensed or plated by Mr Murray at his own expense. Individual drivers had to be licensed by the local authority for which the driver had to undergo a medical, police vetting and pass a test on his knowledge of the area. The driver was responsible for obtaining his own licence which he would have to pay for himself and indeed Mr Murray would not take on any driver who did not hold such a licence. The fleet was insured by Mr Murray, again at his own expense. Initially, Mr Murray told us the cover was third party, fire and theft but from his replies to further questions it would in fact appear to have been comprehensive. It would have been possible for the premium to have been loaded in respect of an individual driver if he was for example under 25 or had points on his licence. Mr Murray told us that in such a case the driver would be responsible for payment of any such additional premium, but in fact this did not arise because throughout the relevant period Mr Murray had no such drivers.

7. We were told by Mr Murray that if a vehicle was damaged in an accident through a driver's own fault, the driver would be personally responsible for the damage and it would be put right at his own expense. The drivers were apparently made aware of this at the outset and it would be for them to take out adequate insurance cover against any such claim. Mr Murray, however, would claim on his own insurance policy if the driver did not pay him. The tribunal asked Mr Murray what would happen if the claim was a large one to which Mr Murray replied "They wouldn't pay would they?". Mr Murray also admitted that he did not know whether any of his drivers were in fact separately insured. We heard no evidence from any of the drivers and from what we were told by Mr Murray, whilst one or two of the drivers may have taken out separate insurance cover, it appeared to us unlikely that the majority did.

8. Fuel, road tax and vehicular maintenance were all paid for by Mr Murray although a driver was expected to keep his car clean and he might therefore have to give it a wash. Drivers were not permitted to use the vehicles for private purposes although exceptionally Mr Murray would allow them to do so if they sought permission. He did not in such circumstances charge the driver although he expected him to pay for his own fuel. Mr Murray gave us an example of a driver whom he allowed to use a car to go and see his mother in return for putting in £5 worth of petrol. Mr Murray stressed that he would not necessarily know if this rule was kept by the drivers and he strongly suspected that vehicles may have been used for private purposes during a driver's shift.

9. All private hire vehicles bore the Benco logo attached to the vehicle by a magnetic strip as this was apparently a condition of the vehicle's plating. No such condition attached to the Hackneys which would not be identifiable as Benco vehicles.

10. Benco advertised, again at Mr Murray's expense, in the Thomsons Local Directory and we were shown a half page advert displaying pictures of a minibus, a black cab and a private hire vehicle. The advertisement advertised airport; delivery and courier services; day to day; shoppers; school and contract work. We were also shown a small yellow card bearing the name "Benco Taxis" and two telephone numbers. These cards were given to the drivers who would distribute them, if asked, to customers and on occasion the driver would add his own name onto the card before giving it out. Mr Murray did not know whether any of the drivers advertised separately in their own right and we certainly were not referred to any such advertising although as we have said we heard no evidence from any of the drivers.

11. Mr Murray had no written contract with his drivers. He would advertise for drivers in the local press, would interview them before taking them on for about 20 minutes during which time Mr Murray would explain to them that they were responsible for their own tax and national insurance contributions. He would also explain the financial arrangements on the vehicle; that they were responsible for any damage to the vehicle caused by their neglect and that they were to keep the vehicles clean and tidy; they themselves were to dress in a proper manner and they had to behave politely and courteously to the customers. He told us he would object to any of his drivers undertaking a second occupation although he would allow them to carry out a completely different job (example window cleaning) provided it did not interfere with the hours available to Mr Murray. He would not allow any of his drivers to work for a competitor.

12. It was up to each individual driver how many hours he worked and he fixed his weekly shifts by agreement with Mr Murray on a week to week basis. However, it did happen that on occasion a driver would not turn up for an allotted shift. If there was not a driver available at any time for contract work this would be subcontracted out to another firm. A driver could refuse a fare if for some reason he did not wish to do it.

13. As we have said, Mr Murray's work was divided into contract work and cash work. The cash work carne from three sources. First, customers would telephone Benco and book a taxi for a particular journey and Mr Murray would instruct one of his drivers to take the job. Secondly, there would be fares picked up in the street or from a rank. Technically, these should only have been done by the Hackney carriages but Mr Murray acknowledged that in fact his private hire drivers did pick up customers who flagged them down although it was against the law to do so. Thirdly, each driver had his own mobile phone and would on occasion carry out a job for which he had been contacted direct. Mr Murray was not able to give us the percentage of his total work accounted for by these various sources. For account work, the drivers did not handle any money. In all other cases, at the end of the journey, the customer would pay the driver and the driver would radio through to base that he had completed that job and notify the amount of the fare charged. Payment was normally in cash although sometimes the drivers would be paid by cheque. It was up to an individual driver whether he took a cheque or insisted on cash. Cheques for cash customers would be made payable to the driver and if a cheque subsequently bounced this was the driver's responsibility and Mr Murray would look to the driver to make up the loss. Equally, if a customer ran off without paying, the driver would have to meet that loss as well. Mr Murray set the prices to be charged for his private hire vehicles, the rate for Hackney carriages being set by the local authority. Mr Murray told us that he set the fares in agreement with his drivers but admitted that in fact no driver had ever objected to Mr Murray's rates or had ever asked for it to be varied.

14. All journeys undertaken, regardless of their source and including therefore those picked up by the driver off his own mobile, had to be reported back to Mr Murray on a trip by trip basis with details of the fare charged although Mr Murray strongly suspected that the fares reported back to him were not always those actually charged. The drivers did not by law have to use a meter in the private hire cars although meters were fitted but in any event Mr Murray carried out no cross check on the meters.

15. At the end of each shift a driver would complete for Mr Murray a sheet headed "Benco Taxis". This listed all journeys undertaken by the driver and the amount of the fare. The total amount of the fares declared on both cash and account work were totted up and the driver would pay Mr Murray 60% of the total taken, or at least the declared total, keeping the remainder for himself. The percentage was worked out on the basis of all journeys undertaken so if, for example, a passenger's cheque bounced or a passenger ran off without paying, the amount of the fare charged would be included and would therefore be a loss to the driver and not to Benco. The driver was expected to settle up with Mr Murray at the end of each shift - if he did not he would not be allowed to take a car out again until he had done. The daily sheets also recorded the start mileage and finish mileage for the day. No oral evidence was given as to the reason for this by Mr Murray although Mr Smallwood in his closing submissions told us that this was done merely as a record rather than as a monitoring exercise. We do not have any evidence on which to take a view on this but it is not of any great importance.

16. The question for determination by the tribunal was whether, as maintained by the Commissioners, the supply of services to the cash customers was made by Mr Murray as principal merely using the services of his drivers in which event Mr Murray would be accountable for VAT on the full value of the fares received or whether in the alternative, as contended by Mr Murray, he hired vehicles out to his drivers who themselves supplied the services to the customers. If that were the case then Mr Murray would only be accountable for VAT on the percentage payments made to him by his drivers.

17. We were referred to the following cases:

Hamiltax v Comrs Customs & Excise 8827

Camberwell Cars Ltd v Comrs Customs & Excise 10178

Robert Snaith v Comrs Customs & Excise 16997

18. In Hamiltax, the facts were very similar to those of the present case and the tribunal found that in respect of both cash and account work, the drivers drove as agents for Hamiltax who were the suppliers of the service to the customers. The tribunal was influenced in reaching this decision, in particular, by the advertising placed by, paid for and in the name of Hamiltax and the fact that the drivers provided virtually nothing except their own services and they were empowered to refuse work.

19. In Robert Snaith, a similar decision was reached by the tribunal even though, unlike here, specific cars were allocated to individual drivers who would keep the vehicles for months at a time at their own home and throughout were responsible for the vehicle's maintenance, upkeep, servicing and cleanliness.

20. In Camberwell Cars, the tribunal found in favour of the Appellant but the facts of that case were substantially different from those of the present case. The tribunal decision distinguished that case from Hamiltax in the following terms.

"The company's argument here starts from a firmer base in that drivers provide and maintain their own cars. They are at any rate equipped to carry on business on their own account. And there is, in my judgment, a real distinction between the conduct of the account work and the cash work from their point of view. In account work a driver is directed to a job, reports the result (including the amount of waiting time) to the company, returns the signed receipt to the company in a courier transaction, ~ and is paid by the company at the end of the week. In cash work he is offered a job, with the option of accepting or refusing it, he makes no report to the company and is paid in cash by the customer, unless the customer fails to pay in which case he bears the loss."

21. The approach by the tribunal in all cases was to weigh up the various factors involved in the operation of the business and it was agreed by both representatives that that was the correct approach for the tribunal to take. On behalf of the Commissioners, Mr Poole referred us to eleven factors which he submitted pointed to the supplies having been made by the Appellant to the customers.

22. On behalf of the Appellant Mr Smallwood maintained that in reality Mr Murray did not have a lot of control over the drivers. He could not dictate their hours of work and even when a shift had been agreed the driver may not turn up. In respect of the takings, Mr Murray had no way of knowing whether he was being given accurate information and he had no way of knowing if a driver was using a vehicle for private purposes.

23. In our view there are very few factors which support the Appellant's contention that it is the drivers who make the supply. Those factors which do support such a view are that the drivers collected cash fares from the customers and bore any loss themselves; the drivers had their own mobile phones and would accept bookings which they took direct rather than through Benco and they were empowered to refuse fares and finally, they were in theory responsible to Mr Murray for any damage caused to their vehicle. We deliberately say "in theory" because the evidence of Mr Murray was that he would probably succeed in reclaiming from his driver only if the amount involved was small. With larger sums or in default, Mr Murray would claim from his own insurers.

24. Although Mr Smallwood stressed that the drivers had to obtain their personal licence at their own expense, this we believe to be neither here nor there. The licence is in effect akin to a professional qualification and being licensed would be a prerequisite to a driver being taken on by any taxi firm. It is a qualification which attaches to the driver personally and enables him to drive any private hire vehicle for any operator.

25. Whilst we accept Mr Murray's evidence that he would not necessarily know if his drivers were deceiving him, we do not accept the consequential submission made by Mr Smallwood. Our view is that it is the rules which are laid down by Mr Murray which determine the status of the relationship between Mr Murray and his drivers, a status which is not changed because some of his drivers may on occasion cheat on him. Indeed although Mr Murray said he was powerless to prevent his rules being broken, it would of course be open to him to stop using a particular driver.

26. The following factors lead us to conclude that Mr Murray was acting as principal in relation to both the account and cash customers and it was he who was therefore providing the supply to his customers. First, Mr Murray owned the cars and was responsible for plating them and for payment for fuel, road tax, maintenance and repairs. Secondly, he laid down the rules which he expected his drivers to abide by including the prohibition of private use, the drivers had to dress properly and behave courteously and most importantly they were not allowed to carry out any work at all for a competitor and no work which would interfere with their shifts for him. Thirdly, the only advertising to which we were referred was in the name of Benco and was paid for by Mr Murray. Fourthly, the drivers had to record for Mr Murray each and every journey they undertook, regardless of its source and they had to account to Mr Murray for 60% of the takings therefrom. Finally, the prices charged for private hire fares were laid down by Mr Murray. The evidence we heard presented a picture of a business comprehensively controlled by Mr Murray with the drivers having very little control over any aspect of it. They had some small degree of personal control over their own actions in that they determined the hours they worked and had the power to refuse a fare or to refuse to take a cheque but in the overall running of the business these matters were of no major significance. Equally, beyond being responsible for making good a bounced cheque or a lost fare and being responsible for any damage caused to the vehicle by their own fault, they bore no responsibility for the running of the business and carried virtually no financial risk.

27. For all the above reasons we conclude that in respect of both cash and account work, it was Mr Murray who made the supply and the drivers acted as his agents.

28. At no time before the tribunal did the Appellant dispute the calculation of the assessment, either as to methodology or amount.

29. The appeal is therefore dismissed. The Commissioners made no application for costs and we make no order.
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