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Macey (t/a Sandwich Cars) v Revenue and Customs CommissionersVAT and Duties Tribunal (London)

18 July 2007

Case DigestSubject: VAT

Keywords: Agents; Principals; Supply of services; Taxis

Summary: Supply of services; Taxis; Position of taxi firm in relation to account customers

The appellant taxi firm (M) appealed against assessments to VAT.

The issue was whether M was making supplies to account customers when self-employed owner-drivers drove those customers' employees or nominated passengers in private-hire vehicles. In return for a monthly flat fee, M provided administrative support and other related services to the drivers. M's account customers comprised customers other than the local authority and the local authority itself. As to the former, there were no written agreements between M and the account customers. The drivers set the fares and received them in full. They also suffered the loss if the passenger failed to pay. They could withhold their services if they wished. Further, the account customers did not receive a discount or have to pay an additional charge. In the case of the largest customer, M would contact other taxi firms and try to arrange transport if no drivers were available. Moreover, the drivers' informal dress code was influenced by the requirements of the account customers. As to the local authority, it and M were parties to a "transport contract". The contract was detailed and included requirements relating to matters such as safety and the drivers' dress code. Further, prices were agreed between M and the local authority, although the drivers received full payment for the journeys which they undertook. For the purposes of determining whether the supplies to the account customers were made by M or by the drivers, it fell to be decided whether M was acting as agent for the drivers in its dealings with the account customers or whether it was acting as principal.

Appeal allowed in part. It was particularly relevant to decide whether M had a pre-existing obligation to the account customers to fulfil the customers' requirements or was simply dealing with each request for a taxi from the account customers in the same way as it dealt with a cash customer, it being agreed that M acted as the drivers' agent in the case of cash customers, Gibbs Travel v Customs and Excise Commissioners Unreported February 4, 2004 V&DTr (London) and Gemini Cars (Egham) Ltd v Revenue and Customs Commissioners Unreported March 7, 2007 V&DTr (London) applied. In the case of the account customers other than the local authority, M acted as the drivers' agent and the supplies of services were by the drivers. It was particularly relevant that the drivers received the full fare for the account work. The account customers were charged the same fares as cash customers and M did not have a formal contractual relationship with the account customers. The fact that M would seek to engage another firm to satisfy a demand from the largest account customer where none of its drivers was available was not very significant. That was just good business practice and did not prove that M either had or even regarded itself as having any legal obligation to fulfil requests for transport from the customer in question. The account work for the local authority was of quite a different nature. There was a formal agreement with the local authority that was only consistent with M acting as principal.

Judge: Richard Barlow (Chairman); MA Sharp

Counsel: For the appellant: Tony Mills, Julie Wilkinson. For the respondents: Matthew Barnes
Legislation Cited Value Added Tax Act 1994 (c.23) s.47(3)
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Again this goes against everything the VAT office set out in own guidelines, or am I missing something significant here

For example it states an operator CAN NOT act as an agent for cash work and a principle for account work as it is the agreement with the drivers that dictates what status the operator has, NOT the agreement or lack of any with the account customer.

It is quite clear in the guidelines that if you employ drivers, which most do not then you act as a principle, and if your drivers are self employed then you act as an agent and that status applies to both cash and account work.

It also states that if you are acting as an agent then you MUST NOT charge account customers VAT on ANY jobs unless the individual driver carrying out that job is registered for VAT. Except of course if you charge the account customer an additional fee for administering the account, in which case it should be charged ONLY on that additonal amount, not the total cost of the fare.

The above has for many years been the bench mark we have been working to, as operators who are agents. Splitting quite clearly who's turnover belongs to each party.

If the B*****d's are now moving the goal posts and using the courts to enforce it with NO prior warning to us that the legislation has changed, where does that leave us?

If we are principles then ALL of our drivers must surely be employed, and as such we will have to pay their tax, NI and comply with EU working hours regulations.

They are sneeking in the back door again to close it firmly on any profit to be made from this industry, regardless if your a driver or operator or both.