Taxi Driver Online

Not sure precisely why this is being reported at this particular time, but this is a piece in the Times, and it's also been picked up by the Daily Mail's website.

But I'd guess it's maybe an NPHTA push to try to get some traction via the media. But nothing particularly new here other than stuff about discussions between government ministers and the trade.


Cab fares could rise by 20% after court ruling on ‘taxi tax’

https://www.thetimes.co.uk/article/cab- ... -gs9knhn88

Taxi firms across the country have called on ministers to change the law after a High Court ruling that risks putting up fares by as much as 20 per cent.

In a judgment affecting large-scale internet operators such as Bolt and Uber as well as independent firms, the court ruled that taxi companies, rather than individual drivers, were liable for the contracts with its passengers.

The decision means that private hire companies could, for the first time, become liable for charging VAT on fares in what critics have dubbed a “taxi tax”.

The industry is in discussions with the Treasury and the Department for Transport. It has called on ministers to change the law to make clear that taxi operators are exempt from VAT.

Under existing rules, private hire operators do not pay VAT as the individual drivers are classed as independent, self-employed contractors and do not meet the required earnings threshold of £85,000 a year.

However in a legal battle involving Uber, the High Court has ruled that taxi firms rather than drivers hold the contract with a passenger. This would mean that the taxi company would be liable for VAT — which would result in taxable income over the £85,000 VAT threshold. Uber has already been forced to raise its prices after a court ruled its operations in London could be liable for VAT.

The latest High Court case extends that ruling across the country and to both online operators and minicab firms where the driver takes the payment directly from the customer. The industry is appealing against the ruling.

Dave Lawrie, director of the National Private Hire and Taxi Association, said the case had sowed confusion and could result in smaller firms going bust.

“[The case] could go either way,” he said. “But if it goes the wrong way it could spell the end of the self-employed business model at the expense of big firms like Uber.”

Lawrie said there had to be a clear distinction between companies like Uber that took money from customers upfront and small firms that took bookings on behalf of drivers who were paid directly by the customer. He added: “The whole situation is a mess and we are in discussions with the Department for Transport to clear it up. But if this doesn’t happen then there is a risk that everyone will have to charge VAT.”

Joseph Jones,who runs Door2Door taxis in Southampton, said imposing VAT on fares would affect both customers and drivers.

“We take a lot of vulnerable customers who aren’t able to use public transport but they don’t have a lot of money,” he said.

“If we put up our prices by 20 per cent they won’t be able to afford it and it will also hit our drivers in reduced earnings. You could easily see tens of thousands of people leaving the industry.”

Another industry source said behind the scenes there was a huge effort to get ministers to take the situation seriously.

“We’ve told the Treasury we’re facing a tax rise through the back door that will have a massive impact on both customers and drivers.

“This is already a hugely competitive industry where customers are very price sensitive and a 20 per cent tax hike simply can’t be absorbed.

Jonathan Main, a partner and Head of VAT at the law firm MHA Moore and Smalley said the case could have “knock on effects for how private hire operators account for VAT”.

A spokeswoman for Bolt said they were calling on the government to “ensure that the tax treatment of companies was clear to all operators to avoid any disruption as a result of the legal decision.”

A spokesperson for HM Revenue & Customs said: “It’s always been the case that taxi and private hire vehicle fares are liable to VAT at the standard rate.”

Problem is perhaps that there's no 'clear distinction'. What about small companies doing account work, for example?


Well indeed it's certainly a mess, because it's all very messy

But you'd have thought that the more relevant Government department to be in discussions with would be the Treasury rather than Dft, since the VAT treatment is surely more the domain of the former rather than the latter

(Although, to be fair, just noticed that later in the article another 'industry source' does specifically mention the Treasury.)

what is the point of bringing this up now why not wait until the result is in and then it can be analysed for it's impact

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The High Court has made the decision, it's now current law.

What the ops are requesting is a change in law, and the chances of that are sweet f*** all.

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IDFIMH

has the Delta challenge been heard already then ?

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Who knows, but the law is the law, and if it wasn't why would the ops association want it changed?

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IDFIMH

Bit more info via Taxi-Point website in respect of the gig economy.

https://www.taxi-point.co.uk/post/hmrc- ... hv-drivers

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IDFIMH

Can't really see much connection to the VAT angle, though, and not really sure what the TaxiPoint stuff is all about, precisely. Obviously TaxiPoint has framed it as about 'Uber and other PHV drivers', but I can't see much here that wouldn't apply to the HC and PHV trades in many locations thirty years ago, say.

Of course, it's maybe more widespread now, and it's all digitised. But it's like saying that the 'gig economy' is something new, while anyone in the old style 'taxi' industry will know that it's nothing of the sort.

I mean, this makes it sound like Uber et al don't currently record how they transact with individual drivers

So I suspect it's more about Uber, Deliveroo and Airbnb optimising the records they keep for HMRC's benefit, rather than changing anything more fundamental. And about just firming up and formalising how HMRC deals with them. Of course, it's always been the case that there's been less scope for drivers to hide their earnings if it's all digitised, but as I think I said on here a few months ago, it's maybe easier for HMRC to audit the likes of Uber than ABC Cars, say, and catch out drivers not declaring, but it's not a hard and fast divide between Uber and the old trade.

And it's not clear precisely where this publicity has originated from. It's in many of the Reach plc online titles like the Mirror, the Daily Record, Chronicle Live, and the Birmingham Mail one below, which is where TaxiPoint sourced its article from (it's also on the Sun's website, but that's a different publishing group, so the article looks a bit different).

But I wouldn't be surprised if it's all originated from the quoted 'tax insurance provider for self-employed workers', called Qdos.

And I don't doubt that HMRC are 'cracking down' on it all, and we all know about how it's impacted the trade in terms of badge applications.

But I wouldn't be surprised if the stuff below is more a marketing pitch by Qdos to sell their services rather than anything hugely fundamental. And a good bit of churnalism for the press


HMRC issues 'crackdown' warning to millions in UK from January 1

https://www.birminghammail.co.uk/news/m ... s-27898283

From January 1, HMRC has instructed digital platforms to record how much money people make by selling their services on them.

A warning has been issued as HMRC is set to make a huge change to tax rules for Brits with side hustles next year. From January 1, HMRC has instructed digital platforms to record how much money people make by selling their services on them.

The changes will impact anybody with a Airbnb, Fiverr, Upwork, Uber, Deliveroo and Etsy side-hustle. The HMRC move is part of a wider tax crackdown on people boosting their income via side hustles, freelancing and self-employment.

HMRC wants to make it easier to spot discrepancies between information provided by a digital platform and the individual, giving the tax office grounds to launch an investigation. HMRC will invest £36.69m in the initiative and employ 24 full-time staff to launch and enforce measures.

Seb Maley, CEO of tax insurance provider for self-employed workers, Qdos, said: “This legislation has flown under the radar, but will have big implications for anyone renting their place out on Airbnb, freelancing on Upwork or Fiverr, or driving for Uber – whether that’s as a side hustle or full-time job.

“The crux of it is that HMRC doesn’t trust the growing number of people with side hustles in the UK to accurately report how much money they’re making this way – so the tax office will go directly to these platforms, who will become responsible for recording this information and handing it over to HMRC.

“HMRC will then compare it with the tax returns submitted by these people. If the numbers don’t add up, HMRC has everything it needs to launch a tax investigation. Needless to say, it’s vital that people earning money this way make sure of their tax compliance.

“The Minimum Trading Allowance is £1000 a year. So anyone earning more than this via self-employment, and above the personal allowance, needs to pay tax on that income. The latest figures suggest there are 7.25m gig workers in the UK, with one in six adults working a gig job once a week – with this in mind, the incoming measures are set to impact millions.”

That's probably what it's all about, in essence. 'Making it easier for HMRC to spot discrepancies'.

HMRC knows that the wealthy and high earners have professionals making sure their money is well hidden so going after lower to middle earners who don't have the luxury of professional advisers is the main way in which the extra 10 billion a year in tax revenues needed can be obtained.

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Got emailed this interesting article from some transport website.

https://groundtransportgroup.com/news-a ... long-view/

VAT and private hire – the long view

There has been a lot of press about the VAT implications of the Uber and Sefton Council High Court decision published in late July. Private hire operators (PHOs) need to know how this might affect their livelihoods.

It is unprecedented for a case that has nothing to do with VAT to cause this much uncertainty on the future VAT profile of this market.

For now, the key takeaway for readers of this article is, steady as she goes.

What happens now?

The most efficient VAT outcome is for a PHO to act as an agent on behalf of the driver for private journeys.

• The PHO will charge a fee to the driver for the introduction of business.

• The self-employed driver will accept the journey at their discretion.

•The driver will agree a fare with the passenger.

•The driver will retain the fare and be liable for any taxes, including VAT.

The PHO’s VAT liability will be limited to fees charged to drivers and fares collected from drivers employed by the PHO. The agency model is supported by published HMRC guidance. There have been several VAT cases over the years on whether particular arrangements were agency or principal, but none of these have disturbed overarching HMRC guidance that a PHO can operate as a principal for account business and an agent in other cases.

The legal challenges

Uber succeeded in its argument that Sefton MBC incorrectly licenced PHOs in its borough and that a PHO should in fact be treated as a principal in the provision of the travel service provided to the passenger.

Uber is using Sefton MBC as a test case for other local councils in England and Wales. Uber lost an earlier decision involving Transport for London (“TFL”), which dealt with separate but similar licencing regulations applying to PHOs licenced by TFL in Greater London.

In the TFL case, Uber wished to be treated as an agent. In losing this case, Uber is now a principal in the provision of private hire journeys in London. To level the playing field across most of England and all of Wales (there are different licencing regulations in Scotland, Northern Ireland, and Plymouth), Uber is seeking the same outcome already suffered in London, namely that a PHO operates as a principal in the provision of a travel service to a passenger.

Subject to a successful appeal of the High Court decision in the Sefton MBC decision, Uber has succeeded in its endeavours, at least to the extent of licencing.

Where is the VAT issue?

The VAT issue is lurking in the interaction between HMRC guidance and licencing regulations.

To achieve the preferred VAT outcome for private journeys, a PHO will act as an agent, introducing business to a driver for a fee. The PHO charges VAT on fees charged to the driver. The driver is liable for any VAT but only if they breach the annual VAT threshold of £85,000.

Set against the agency treatment is Uber’s success in the Sefton case in which it convinced the court that “an operator who accepts a booking from a passenger enters as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking.”

At face value, there is a contradiction between a PHO being an agent for VAT and a principal for licencing regulations.

What now?

In the short term, steady as she goes. So far, licencing regulations outside London have not changed, nor has HMRC changed its VAT guidance. If you have an operating model that works for you and provides a profitable outcome, this is not the time to change it.

HMRC cannot collect more VAT than you pay now unless:

• Your licencing requirements change, OR

• HMRC disagree with the way you pay VAT today, based on your current operating model.

This means HMRC will not collect any VAT for past VAT periods unless they disagree with the basis on which you are paying VAT today. This would be nothing to do with the Uber and Sefton case.

What is on the horizon?

Any change in the VAT treatment of fares for private journeys will not require a change to VAT law or HMRC guidance. If a PHO is a principal in the provision of the service provided to a passenger, it is liable for VAT on the fare collected by the driver. This position is clearly set out in existing VAT guidance published by HMRC. It already applies for account business and employed drivers.

HM Treasury and HMRC have provided limited reassurances that they do not plan to change any existing guidance for the sector. Unfortunately, that reassurance is not worth a great deal. The key change will not come from HMRC, it will result from changes to licencing requirements. If local authorities require PHOs to act as principal, HMRC will look for VAT to be paid on that basis.

What can I do?

First, stress test your business for the worst-case outcome.

• Will you still be profitable if you are required to pay 20% on all private fares?

• If not, can you increase fares and remain competitive?

• From a practical perspective, how will you collect data on private fares, so you can pay the right amount of VAT to HMRC?

Next, support any lobbying activities to preserve the status quo, namely no VAT on private journeys. Private hire would be the only form of passenger transport with VAT. There is no VAT if we travel by bus, minibus, coach, train, aircraft, or in a licenced hackney cab. Private hire is a lifeline for many parts of our communities who cannot afford a car, may find it difficult to access other forms of public transport because of their personal circumstances, or simply because there is no available bus or train service.

It seems grossly unfair to single out this form of transportation purely because of unrelated licencing regulations.

Finally, this could also be presented as an unexpected Brexit dividend. The UK could not extend zero-rating to private hire pre-Brexit, because we were bound by the restrictions of EU law. This is an opportunity to convince the Treasury and your local MP to support our local communities by providing targeted relief from VAT.

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IDFIMH

Article seems to have been written by some international tax, audit and consultancy type organisation. A firm of accountants, in basic terms


Might have a proper read of it later on, but it's quite heavy going

But for some reason I was drawn to the above. And that's not how I read the Sefton case at all. It wasn't about Sefton 'incorrectly licensing' private hire operators, and was more about how the licensing process and legislation was interpreted in terms of the agent/principal thing, and the VAT implications therefrom.

Correct me if I'm wrong, but not sure that the case concluded that Sefton MBC had done anything wrong...

It was decided that Sefton should ensure that their operators were the principal.

So what they did wrong was not have that condition as a licensing requirement.

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IDFIMH

This attempting by operators to class themselves as agents I think will ultimately fail there is probably a very substantial increase in vat revenue collectable if inland revenue establish once nad for all that they are principal not agent

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Been meaning to look back at this for a week now, and still can't summon up the effort.

But still not sure what Sefton MBC did 'incorrectly' per se. I mean, the case seemed to be more about the construction of the legislation in terms of contract law and the VAT implications rather than precisely what Sefton MBC was doing. Taxation isn't really the domain of local authorities. And Sefton just happened to be the local authority selected by Uber for what was effectively a test case, rather than Sefton being particularly out of step with all the rest of them.

Of course, to a degree it's all about how it's framed rather than the legal minutiae, but viewing it as the council doing something incorrectly isn't how I'd characterise it.

It may indeed indeed be a good idea for Sefton and other local authorities to do something to clarify the VAT position in their conditions (as I think TfL did vis-a-vis the London legislation), but hitherto that hasn't really been within their direct remit, in my opinion at least.

But if anyone could point to particular passages or paragraphs in the judgement that point to Sefton licensing operators incorrectly, then I'll gladly stand corrected:

https://www.bailii.org/ew/cases/EWHC/KB/2023/1975.html