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HMRC cannot assess whether private hire VAT changes will disproportionately affect disabled passengers and women
HM Revenue & Customs has acknowledged that it lacks the data needed to assess whether planned changes to private hire vehicle VAT could disproportionately affect certain passenger groups.
The finding appears in a tax information and impact note published on Thursday 29 October, following the Government’s announcement of new VAT arrangements for larger taxi and private hire operators.
The proposed legislation will require qualifying operators acting as agents to account for VAT on the full value of passenger fares from 2 January 2028 once a consultation has been completed.
HMRC’s assessment identifies women and people with mobility difficulties as groups that make more private hire journeys than other passengers.
Evidence from England indicates that people with mobility difficulties make more private hire journeys annually than those without such difficulties. Women also make more journeys than men.
However, the department says it does not hold sufficient information to determine whether the proposed tax changes would have a disproportionate effect on groups protected under equality legislation.
The assessment recognises that passengers could face higher fares if operators respond to the new VAT treatment by changing their prices.
No estimate is provided for the potential fare increases or the financial consequences for passengers who depend on private hire transport.
The legislation is intended to address differences in VAT treatment between operators acting as principals and those arranging journeys as agents for drivers.
Under current arrangements, private hire operators in London are required to act as principals, while operators elsewhere can act as agents. Where a driver supplies the journey through an agency arrangement, the driver accounts for VAT on the full fare if VAT-registered.
The Government intends to change that treatment for larger operators, with £50 million in annual fare turnover identified as its preferred threshold.
The final threshold remains subject to consultation.
HMRC estimates that the measure will raise £385 million in additional tax revenue during the 2028-29 financial year.
The assessment also addresses the potential consequences for drivers. HMRC says some private hire drivers may choose to register voluntarily for VAT following the changes, although it does not expect the measure to result in substantially more businesses being required to register.
For private hire operators, the immediate requirement is to monitor the forthcoming consultation and assess whether their fare turnover could bring them within the new rules.
