FREENOW calls for lower VAT and welcomes Chancellor’s commitment to consult on VAT treatment of PHVs

Responding to the Chancellor of the Exchequer's commitment to consult on the VAT treatment of Private Hire Vehicles (PHV), Mariusz Zabrocki, General Manager at FREENOW UK, expressed the industry's concerns regarding the current VAT status and its potential consequences for the PHV sector.

Zabrocki highlighted that the July 2023 High Court ruling in the case of Uber Britannia Ltd v Sefton MBC has inadvertently led to a 20% VAT requirement on private hire fares, raising alarm bells among operators throughout England. The General Manager emphasised that this tax change has already resulted in a reduction of investment in the industry.

Acknowledging the essential role played by PHV drivers in the transport system and local economy, Zabrocki argued that the private hire vehicle service should not be perceived as a luxury for VAT purposes. He pointed out that other transport modes, such as buses, trains, ferries, canal boats, and limousines, are zero-rated, further strengthening the case for a change to the VAT regime for PHV operators.

The Chancellor's commitment to consult on the VAT treatment of PHVs in early 2024, as announced in the Autumn statement, has been broadly welcomed by PHV industry stakeholders. The inclusion of the paragraph in the statement recognises the significance of addressing the impacts of the aforementioned High Court ruling.

Mariusz Zabrocki, General Manager at FREENOW UK, said: "We’re glad to see that the Chancellor has announced the Government's intention to consult 'on the impacts of the July 2023 High Court ruling in Uber Britannia Ltd v Sefton' and its consequences for the VAT Treatment of Private Hire Vehicles. The current VAT status has already led to a reduction of investment in the sector, which is not ideal considering the current socio-economic landscape and the fact that so many people rely on this industry to make ends meet.

“Private Hire Vehicle drivers play a key role in the overall transport system and the local economy. If we look at other transport modes, such as buses, trains, or even ferries, canal boats or limousines, they are all zero-rated. The private hire vehicle service must not be regarded as a luxury for the purposes of VAT. That's why FREENOW continues to call for a lower level of VAT for PHV operators to secure a VAT regime that is fair for the industry and avoids an unnecessary increase in fares for passengers."