Government decision to impose 20% VAT on private hire journeys welcomed by Veezu
- Perry Richardson
- 11 minutes ago
- 3 min read
The Government’s decision to rule out imposing 20% VAT on private hire vehicle journeys has been welcomed by major regional operator Veezu, which said the outcome provides long-needed stability for passengers, drivers and the wider sector.
The announcement followed the publication of the Treasury’s formal response to its consultation on VAT treatment of PHVs, released on the Chancellor’s Budget Day.
Veezu Chief Executive, Nathan Bowles, said the decision reflected the concerns of operators and passengers who rely heavily on local private hire services. He pointed to the recent Supreme Court ruling in Uber v Sefton, which confirmed that operators outside London may legally continue using long-standing agency-based operating models.
The Treasury’s consultation response set out why ministers opted not to extend 20% VAT to to the whole of the customer PHV fare, despite earlier High Court rulings that led many operators to fear mandatory principal-based contracting across England and Wales. The Government acknowledged wide concern over fare increases, potential reductions in demand and risks to vulnerable passengers if the tax burden rose sharply. Stakeholders warned that applying 20% VAT to the passengers entire fare, would likely reduce journey volumes and strain local mobility networks.
Move removes threat of significant fare rises and operational disruption for PHV operators across England and Wales
Officials also accepted that operators and drivers had already faced prolonged legal uncertainty following a series of court decisions since 2021. The Treasury noted that the Court of Appeal and Supreme Court rulings ultimately meant operators outside London are not required to contract as principal and therefore are not automatically liable for VAT on the full paid fare. Ministers concluded that forcing a nationwide shift to principal-based contracting via tax rules would undermine established business models and drive inconsistency across regions.
However, while the Government ruled out imposing standard-rate VAT on the whole price of a PHV journey, it confirmed it will legislate to exclude PHV and taxi services from the Tour Operators’ Margin Scheme from 2 January 2026, ending the ability of some principal-model operators to pay effective VAT rates of around 4 percent. Treasury officials said the TOMS scheme was never intended for domestic transport services and its use had led to uncertainty and competitive imbalances within the sector. Ending TOMS for PHVs is expected to secure around £700m a year in revenue, according to OBR-certified forecasts.
For operators such as Veezu, the combination of maintaining existing VAT arrangements and removing TOMS use for its competitors is seen as a pragmatic split outcome. It preserves the agency model that underpins most private hire operations outside London, while closing what the Government considers an inappropriate VAT advantage for a minority of players. The Treasury said it will continue to keep regulatory frameworks under review to ensure passenger safety and a fair competitive environment across England.
Nathan Bowles, CEO of Veezu, said: “We welcome the Government’s decision to rule out 20% VAT on private hire journeys. This is the right outcome for passengers, drivers and local communities. We are pleased the Government has listened not just to operators, but to the millions of people who rely on private hire everyday to get to work, hospital appointments and family commitments.
“The Supreme Court’s unanimous and clear ruling in Uber v Sefton confirmed that our long-standing operating model works and keeps services affordable, reliable and safe. Today’s clarity gives everyone in the sector the stability we need to keep Britain moving.”
