Taxi Driver Online

ROBERT DAVID CLARK

TRANSPORT - taxi-bus service - whether service provided by owners-drivers or Appellant - Appellant co-ordinating service and providing facilities - VATA 1983 Sch 5 Group 10 - Public Passenger Vehicles Act 1981 ss 81, 82(1), Transport Act 1985 ss 2, 6 to 9 - lawfulness of scheme - criteria to be considered - feasibility of Appellant's contentions.

TRIBUNAL CENTRE: MANCHESTER

DECISION NUMBER: 13063

APPELLANT: ROBERT DAVID CLARK

CASE REFERENCE NUMBER: (MAN/93/1351)

RESPONDENTS: THE COMMISSIONERS OF CUSTOMS AND EXCISE

TRIBUNAL CHAIRMAN: MR C P BISHOPP

LOCATION: SITTING IN PUBLIC AT

WARWICKGATE HOUSE
WARWICK ROAD
OLD TRAFFORD
MANCHESTER M16 OGP

DATE: 28TH JULY 1994

FOR THE APPELLANT: MR A ROSS-SERCOMBE, VAT CONSULTANT

FOR THE RESPONDENTS: MISS PAULA TAYLOR

RESULT OF APPEAL: DISMISSED


Decision

This appeal has been brought against an amended assessment in the sum of £76, 466.28, including tax of £69, 768 and interest of £6, 698.28, dated 26 January 1994. It was preceded by a much higher assessment, raised in September 1993, which was withdrawn in the light of representations made on behalf of the Appellant. The arithmetical accuracy of the revised assessment is not challenged. The appeal raises in a novel form a question which has been considered by these tribunals in numerous cases, namely, whether the Appellant is to be regarded as the principal carrying on a business through the agency of others who are, or more usually are to be treated in like manner as if they were, his employees; or instead is providing to them only some service ancillary to the main supply which is rendered to the ultimate customer by those others. Putting the point another way, the question for determination is whether there is one business, effectively controlled by the Appellant; or several individual businesses, each to be regarded as standing alone.

The Appellant is engaged in several business activities but this appeal concerns only one of them, a 'taxi-bus' service which operates in and around Preston, Lancashire, under the name 'Lancashire Rose Taxi-Bus Co'. In the past, the Appellant has been a taxi-driver but some years ago he gave up taxi-driving and acquired a garage business which trades under the name 'Pool Motors'. It is for that business activity that he is registered for VAT purposes. Several taxi-drivers are customers and, no doubt because of his acquaintance with them and his understanding of their business, some of those taxi drivers, he said, who had decided between them that setting up a taxi-bus business would be worthwhile, approached him as someone they thought suitable to ascertain whether such a business could be established and, if so, to make the necessary arrangements for them. He duly made some enquiries and, eventually, obtained an operator's licence in his own name permitting him to run a bus service. He emphasised that the licensing authorities were unsure of the legal requirements which applied to a bus service run in the manner of this one, a point to which I will return later.

The service started in January 1990, some months after the Appellant had obtained the necessary operator's licence. The reason for the delay was not explained to me. Then, taxis operating within a group known as 'A1 Taxis' (an existing, conventional taxi business) plied for hire on set routes and to a pre-determined time-table. A radio control service was provided by A1 Taxis, a concern which, the Appellant told me, he did not own though I understood him to have some interest in it. There have been a number of changes since the bus service began. First, minibuses gradually replaced the taxis. In the beginning those minibuses were owned by the Appellant but driven by others; the nature of their relationship with the Appellant was not explained to me. I was, however, told that the drivers bought the minibuses from the Appellant within a short time after their introduction. More recently, the number of vehicles - all minibuses - has increased and the geographical range of the service has been expanded. Mr Clark's evidence on these points was not challenged.

The vehicles are painted in uniform colours and bear the Lancashire Rose emblem. Each bus is now owned by its driver, rather than by the Appellant or by Lancashire Rose Taxi-Bus Co, which the Appellant told me was an association formed by the drivers, but nothing more. He also said that he does not own or drive any of the minibuses used in the scheme. I accept his evidence on those points also.

The services run to published time-tables. An example was reproduced in the Commissioners' bundle of documents. It was published by Lancashire County Council. It describes services running from 23rd September 1991 - and therefore when the scheme was quite well established - and lists buses running in each direction on one route at approximately ten minute intervals from 9am to 8-30pm. The time taken, according to the time-table, for a bus to travel from one end of the route to the other is 30 minutes; some run for only part of the total route. It is conspicuous that the operator of the bus service is identified as Pool Motors. It is also obvious from a perusal of the time-table that several drivers working simultaneously would be needed if the frequency of the advertised services were to be maintained.

It was apparent from his evidence that the Appellant had remained throughout closely involved in the organisation of the scheme, and it was largely at his instigation that the drivers began to use minibuses in place of taxis. It is the Appellant, at all times, who has negotiated with the licensing authorities and with other bodies, such as Lancashire County Council, who have some official interest in the scheme. In addition, he has obtained facilities at the bus-station in the centre of Preston which enable the drivers to use it as a terminus. I heard also evidence that he placed advertisements promoting the service and seeking further owner drivers with a view to expanding the bus service, and an example of such an advertisement was produced in evidence. Applicants are invited to write to the Appellant at Pool Motors.

The financial arrangements, as the Appellant explained them to me, are that the drivers pay all of the acquisition and maintenance costs of their vehicles, and pay for their own fuel, and they keep the entirety of the fares which are paid to them by the passengers. In addition they receive from Lancashire County Council the amount of the subsidy by which the Council supplements the concessionary fares paid by pensioners and others although it is the Appellant who makes the claims for the subsidy on their behalf. At first, he said, the Appellant received no reward for his contribution to the service - a gesture on his part, as he explained, designed to get the scheme off the ground - but later he took a proportion of the fare income. Now, however, he receives a fixed weekly fee from each driver for use of the facilities which he has obtained at Preston Bus Station - in 1993 the fee was £45 per driver per week - and he also retains the fuel rebate paid to the operators of such services by the Department of Transport. He told me, and I accept, that he does not now obtain a share of the fares. The drivers keep records of the fares they take but Mr Clark explained, and again I accept, that those records are now maintained for the purpose of recovering the subsidy from the Council, and not in order that the drivers might in some way account to the Appellant for a share of the fares. The Appellant also has an incidental source of income from the scheme in that he has sold most, if not all, of the minibuses to their drivers, which he has done at normal commercial prices, and he also services most, it not all, of the vehicles, again for reward. I saw a copy of his accounts for the year ended 31 January 1993 which include his income from the scheme as he described it, while not including the fares collected or any part of them. Those accounts naturally reflect the Appellant's understanding of the position, and are not conclusive of the true nature of the scheme.

Generally speaking, public transport services are zero-rated for value added tax purposes by Group 10 of Schedule 5 to the Value Added Tax Act 1983 (Group 8 of Schedule 8 to the 1994 Act) but the benefit of those provisions applies only to the 'transport of passengers -

*
(a) in any vehicle, ship or aircraft designed or adapted to carry not less than 12 passengers .': see item 4 of the Group.

The minibuses used by the service with which this appeal is concerned are capable of carrying fewer than twelve passengers and consequently the fares paid ordinarily bear value added tax at the standard rate. However, each of the drivers has, individually, a turnover below the registrable limit while the aggregate value of the fares collected by all the drivers is substantially above that limit. Accordingly, if the service is to be regarded properly as one rendered by each driver individually to the passengers carried on his minibus, none of the drivers nor - the important point for this appeal - the Appellant needs to account for value added tax on those fares. If however the service is properly to be regarded as one undertaken by the Appellant, the drivers merely being his agents for the purpose, he must account for value added tax on all of the fares collected, as the Commissioners contend and, if that were my factual finding, he concedes. The Appellant does, I understand, account appropriately for value added tax on what he considers to be his own income from the scheme, as I have described it above.

I now return to the licensing of the scheme, and the statutory provisions governing such licensing. They are to be found in the Public Passenger Vehicles Act 1981 sections 81 and 82(1), the Transport Act 1985, sections 2 and 6 to 9 inclusive and the Public Service Vehicles (Registration of Local Services) Regulations 1986 (SI 1986 no. 1671) as amended by amending regulations of 1988 (SI 1988 no. 1879) and 1989 (SI 1989 no. 1064). It is not necessary for me to set most of those provisions out. Their effect is that a local bus service - which this plainly is - may be operated lawfully only if it has been registered with the Traffic Commissioner for that area by its operator. By section 81 of the 1981 Act, the 'operator' is (save in circumstances which are of no application here)

'(i) the driver, if he owns the vehicle; and

(ii) in any other case, the person for whom the driver works (whether under a contract of employment or any other description of contract personally to do work).'

This scheme has been registered with the appropriate Traffic Commissioner by the Appellant who accepted that, for the purposes of the licensing provisions, he must be regarded as the operator. I have some doubts about that proposition, to which I will return. However, Mr Ross-Sercombe, the tax consultant who represented the Appellant, argued that the fact (if indeed it is the fact) that he was the operator for the purposes of those provisions did not carry with it the implication that he was to be regarded as the operator for all purposes, and in particular did not lead to the conclusion that the drivers must be his agents in the operation of the service. He told me that, so far as he was aware, the bus service with which I am concerned was unique, and that it must be considered in that light - in particular bearing in mind that it may be run in a way which was not in contemplation when the statutory framework was designed - and that words used to convey a particular meaning in one context must be considered carefully before being assumed to bear the same meaning when used in another.

Mr Ross-Sercombe's argument that the manner in which the service is run is unique is to some extent borne out by the text of two letters of which copies were inclined the bundles of documents produced at the hearing. The first of those letters was written by the Clerk to the Traffic Commissioners to the Appellant on 3 March 1993. The relevant part of it reads:

'From your last letter and our subsequent telephone conversation the facts would seem to be as follows: The majority of your employees are owner drivers. You do however have contracts of employment and contract lease agreements with all the employees of Pool Motors/Lancashire Rose Transport. These agreements quite clearly state that you are at all times (when engaged in the operation of local services) in overall charge of the vehicle and the driver. The driver is in effect acting as an employee for which he receives a wage and the onus of responsibility for the operation fully rests with yourself.

In a hypothetical situation, if a police officer discovered that a vehicle had a defective tyre, proceedings would be instigated against you as the person in full and effective control, as opposed to the driver. The driver (although he may be the owner of the vehicle) is merely an employee. The drivers are at all times fully under your employ and are at all times following your instructions.

This is a particularly complex situation and one that I have not in the past come across. I do however feel that based on the full facts now before me, you and your drivers are not committing any offence and your operation, whilst unusual, is not illegal.'

A copy of what I understood to be the agreement to which the letter refers was produced in evidence. I am bound to say that it is so poorly drawn up that parts of it are almost unintelligible. The evidence I heard did not make it clear to me whether any, and if so how many, of the drivers had entered into an agreement in this form or into any other similar agreement. For that reason I have concluded I should not attach too much weight to the agreement, though if I were persuaded that it (so far as it can be understood) reflects the true nature of the relationship between the Appellant and the drivers, it would to my mind be conclusive evidence that the appeal must be dismissed since, as the Clerk to the Traffic Commissioners also concluded, it demonstrates close control by the Appellant over the manner in which the service is operated. The particular provision to which I consider reference was made in the Clerk's letter reads 'Pool Motors shall have all operational control while operating all Bus Routes' but there are others - one, for example, permitting Pool Motors to inspect vehicles without prior notice, and another permitting Pool Motors (I assume -the agreement is not clear on the point) to require drivers to use vehicles other than their own - which are entirely inconsistent with the notion that the drivers are operating their own businesses.

The second of the letters I have mentioned was written by the Department of Transport to the Appellant on 4 October 1993. It concerns his claim for the fuel rebate, which represents a substantial proportion of his income from the bus service. The relevant parts of the letter read as follows:-

'With regard to my recent visits and our telephone conversations regarding the eligibility of your claims for rebate, as you are aware, I carried out an intensive investigation to ascertain whether your unique set up qualified under the conditions imposed.

1. During the course of those investigations it came to light that the owner/drivers of the vehicles, with the exception of Mr Cooke (senior), were not in possession of an operators licence. As they are self employed and driving their own vehicles most of the time they are using their vehicles for hire and reward. This type of operation requires them to have an operators licence in their own name if they wish to continue to operate local services.

2. The Special Restricted operators Licence (PC 2884 T) granted to you under Section 12 of The Traffic Act 1965 has been issued by virtue of the 12 Hackney licences granted to Pool Motors by South Ribble Borough Council. On each of those licences you are recorded as the owner of the vehicles to which the licences apply, this is not strictly true, most of the vehicles are owned by the drivers .

3. I mentioned my concern that any irregularities with regard to licensing of vehicles, particularly using a vehicle to carry members of the public for hire and reward, could possibly create problems with accident insurance. I contacted Messrs Crowe Motor Policies who currently arrange the coverage for Lancashire Rose and explained the situation regarding the usage of the vehicles. I was informed that the insurance company was unlikely to accept liability in the event of a claim under those circumstances. In order to eradicate this problem, each of the owner/drivers should take immediate steps to obtain their own operators Licence.

4. Possession of an operators Licence entitles the holder to operate local services provided they have been authorised by the Traffic Commissioner for the area. As the holder of such a Licence, the Traffic Commissioners accepted your application and authorised you to operate service No PC 8071. There are, however, doubts concerning the legality of the operation due to the circumstances described in paragraph 2.

5. As we agreed, your operation is somewhat unique in that you are claiming rebate based on services which are operated by owner drivers and on fuel which you do not purchase. As the holder of the route registration you are entitled to make such a claim provided there are records maintained which support claim figures .

I trust that you are now fully aware of the requirements and the conditions imposed in claiming for fuel duty rebate, I should be pleased to offer further assistance if required. I have sent copies of this letter to some of the owner/drivers and have enclosed additional copies for any that have not received one, I have also forwarded a copy to your accountant and NWTA.'

It will be seen that while the Department of Transport was prepared to accept that the service was run in a manner which was unique, there were nevertheless some doubts about its legality and a suggestion, to put it no higher, that the owner-drivers, because of their status, ought to have their own operators' licences. I understood, however, that the Appellant remained the only person involved with the scheme to hold such a licence save for the one driver identified in the letter. He told me that the reason why he held the licence was that it was relatively simple for him to obtain an operator's licence as the holder of the Hackney licences mentioned in the letter, but that it would be more difficult for the owner-drivers to obtain them. I heard no further evidence on that point. The author of the earlier letter, the Clerk to the Traffic Commissioners, evidently proceeded upon an understanding of the relationship between the Appellant and the drivers which is fundamentally different from the relationship as it was described to me. I saw no further correspondence, and heard no evidence, demonstrating that the Clerk to the Traffic Commissioners had been disabused of his misunderstanding. Likewise, it was not suggested that the Appellant had taken seeps to correct the statement mentioned at paragraph 2 of the Department of Transport's letter.

I am troubled by the manner in which this scheme is run. The acceptance by the Clerk to the Traffic Commissioners of the lawfulness of the scheme, and by the Department of Transport of the Appellant's entitlement to the fuel rebate, both being based on misunderstandings, do not seem to me to lend any weight to the Appellant's case. Though it is not, strictly, a matter for this tribunal, I must nevertheless view with concern a business which appears to be run unlawfully and where there may be some doubts about the Appellant's entitlement to subsidies paid out of public funds. Though I did not hear any argument on this point, it seems to me that, for the service to be run lawfully, either the Appellant should become the owner of the buses, in which case he could retain the fuel rebate, or each of the drivers should obtain his own operator's licence, and himself claim the rebate. Whatever my doubts about the lawfulness of the scheme, however, it is clear that the incidence of tax is to be determined by reference to what is actually done and not by reference to what ought to be done, and I recognise some force in the Appellant's argument that the manner in which this scheme is unusual, and that his holding of the operator's licence is not necessarily an indication that he must be regarded for VAT purposes as the sole operator of the service. I do not find his holding of the licence the conclusive factor, though it is inescapably of great relevance.

I was referred both by Mr Ross-Sercombe and by Miss Taylor, who appeared for the Commissioners, to a number of decided cases: Cronin v Customs and Excise Commissioners [1991] STC 333, Customs and Excise Commissioners v McHeny's (Hairdressers) Limited [1993] BVC 43 and Carless v Customs and Excise Commissioners [1993] STC 632, all decisions of the High Court; and Hamiltax v Commissioners of Customs and Excise (LON/91/1420 Case No. 8827), a decision of this tribunal. They relate, respectively, to a driving school, a hairdressing salon and, in both of the last two cases, to a taxi and car-hire operation.

It is apparent from those cases that the question I have to ask myself, in the context of this appeal, is: was the bus service supplied to members of the public by the Appellant, acting through the self-employed drivers, or was it, instead, supplied to the public by those drivers, the Appellant merely providing some facilities and other services to the drivers rather than to the passengers? The answer would be clear if the drivers were employed by the Appellant, driving vehicles owned by him. The converse fact that the drivers were, as I accept, self-employed is no more than the essential feature which must be present if the Appellant is to succeed, but it is insufficient by itself; there must be more if the appeal is to be determined in his favour. Looking at the same question in another fashion, I can ask myself whether the drivers should properly be regarded as self-employed persons each carrying on his own business of supplying transport services to members of the public. To answer that question, I must have regard to such matters as their use of their own equipment; their maintenance of their own accounts; the degree of risk they run and the opportunity they have of making a profit; to what extent, if at all, they are subject to control by the Appellant; and I must consider the perception of the public, especially the customers. If there are factors which point in different directions, I must then undertake a balancing exercise in order to arrive at the answer.

I heard very little evidence on any of the points I have mentioned - in particular none of the drivers gave evidence - and have found it necessary to draw my own inferences. I accept that the vehicles are owned by their drivers, that they pay for their maintenance and for their fuel, and that they keep the fares and subsidies which they earn. All of those factors support the conclusion that the drivers are running their own businesses. Mr Clark told me that the drivers worked out their own rota and accordingly a driver could world such hours as he chose. While I am prepared to accept that the drivers drew up their own rota, and there was some flexibility about working hours, I find it impossible to accept that a bus service running to a timetable could be maintained if the drivers of the buses could work whatever hours they chose. Of necessity, the drivers must co-operate. The Appellant put this argument forward as one pointing to the conclusion that the drivers were running their own businesses. To my mind it points instead to the conclusion that this was a combined operation, each of the drivers being dependent on the others for the overall efficient running of the service. I will return to this point later.

I have borne in mind also the fact that the public would (in my view) undoubtedly regard this as a single business, run to a common timetable and using buses painted in a uniform livery: it is held out as such. It is often argued, particularly in appeals of this kind which relate to hairdressers and driving instructors, that the customer patronises one person rather than the business within which he or she apparently works, and that this factor should be accepted as one supporting the Appellant's case. A similar argument was raised here, Mr Clark contending that passengers chose to travel when they knew a particular driver would be on the bus. I consider that argument a little difficult to reconcile with his evidence that there was flexibility about working hours, but in addition I cannot accept that a person wishing to travel by bus chooses to travel not by reference to the published timetable but only on a bus driven by a particular person. Much more likely is that the first bus to arrive is boarded, regardless of the identity of the driver, and that journeys are planned in order to arrive at the chosen destination at a particular time, rather than as a social event in order that pleasantries might be exchanged with the driver. Those are factors which point to the conclusion that this is to be regarded as one business rather than several.

It is plain from the evidence I heard - indeed it was not disputed - that the Appellant has an interest in the promotion of the bus service, since he receives both a fee for use of the bus station facilities which increases as the number of drivers increases and the fuel rebate which is linked to the amount of fuel consumed. Plainly too he does play a significant part in the running of the service. Although the initial impetus may have come from the taxi-drivers who approached him, it is clear that, throughout, the Appellant has had a substantial measure of control over the running of the scheme, if not the finer details such as the drivers' working rota. Even leaving aside the written agreement which I have mentioned, I cannot disregard the description of Pool Motors (the Appellant's business) as the operator of the scheme in the published time-table, the manner in which the scheme began (when after the brief initial use of taxis the minibuses were owned by the Appellant), the fact that it is he who advertises for new drivers and the direct link between the number of drivers and the amount of fuel consumed by the vehicles and the Appellant's own income from the scheme. All of those factors, and the Appellant's holding the operator's licence, also favour the Commissioners' interpretation. Any weight which may be attached to the written agreement would serve to strengthen the Commissioners' case.

To my mind, the factors pointing in favour of the Appellant are heavily outweighed by those pointing in favour of the Commissioners, but in addition I have been persuaded above all else by what seems to me to be the feature of the scheme which distinguishes this case from all of the others which I have encountered, including those to which I was referred and some which I have myself heard previously. It is possible to operate a taxi service, to give driving lessons or to work as a hairdresser as an individual. It is not, in my judgment, possible to operate a bus service of the scale of that described to me in that fashion. No one driver alone could conceivably provide the frequency of service which is offered. The timetables make it abundantly clear that the drivers are working as a group and not as individuals. It could not be said that any one of the drivers operated independently of the others; on the contrary, each was dependent on the others to maintain the service and, perhaps most importantly of all, each of the drivers and the drivers collectively were dependent upon the Appellant to co-ordinate their operation and to obtain and provide for them facilities such as the use of Preston Bus Station without which the service offered could not have been as it is. I am satisfied, therefore, that this must be regarded as a single enterprise, however the individuals making it up choose to arrange their affairs amongst themselves.

With the exception of one driver it is the Appellant alone who is the holder of the requisite operator's licence and it seems to me that he must bear the consequences which naturally follow, namely that he must be regarded as the operator of the service and in overall control of it. Moreover, there is no-one else who could realistically be considered to be the operator. I am therefore satisfied that the bus service must be regarded as one operated by the Appellant and that the drivers are, for that purpose, his agents. It may well be that Parliament, in limiting the zeros rating of public transport services to vehicles capable of carrying twelve or more passengers, did not have in mind bus services where the available passengers do not justify the use of vehicles of that size, but that is not a matter for this tribunal.

There being no challenge to the arithmetic of the amended assessment, the appeal must be dismissed.

Miss Taylor did not ask for a direction in respect of costs and I do not make one.
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