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HMRC examining implications of landmark ruling that could affect VAT obligations for PHV operators



HM Revenue and Customs (HMRC) are currently assessing the potential impact of a landmark ruling on the Value Added Tax (VAT) obligations of private hire vehicle (PHV) operators.

The ruling was handed down by the High Court in the case of Uber Britannia Limited v Sefton Metropolitan Borough Council, addressing legislation relating to PHVs in England, excluding London and Plymouth.

The ruling emerged from a legal dispute involving Sefton Council and local minicab operators who sought to preserve the existing arrangement, wherein the contract for minicab transportation was considered to be between the driver and passengers rather than between the operator and passengers. However, Uber and the App Drivers & Couriers Union (ADCU) successfully challenged their opponents, resulting in a significant transformation of the private hire vehicle (PHV) sector.


The ruling was not a tax case and does not have a direct bearing on tax positions. Existing VAT rules around principality, which are applicable to all businesses, continue with no changes. The Government routinely monitors and reviews all tax matters.


Local licensing authorities like Sheffield City Council (SCC) are currently ‘working to establish the full extent’ of the ruling on private hire operators. Following the landmark decision, the council intends to determine how this ruling ‘impacts’ licensed private hire operators.

SCC Councillor Joe Otten, Chair of the Waste And Street Scene Committee, said: “Sheffield City Council is aware of the recent High Court ruling in the case of Uber Britannia Limited v Sefton Borough Council, relating to private hire operators. The council is working to establish the full extent of the ruling and determine how this impacts private hire operators that are licensed by Sheffield City Council.”


In a similar ruling in London back in 2022, Transport for London (TfL) warned all Private Hire (PH) Operators to take ‘IMMEDIATE ACTION’ to make changes to their terms and conditions and ensure compliance to updated regulations.

A new condition was inserted into the Private Hire Vehicles (London) Act 1998 stating:


‘(14) The operator shall enter into a contractual obligation as principal with the person making the private hire booking to provide the journey which is the subject of the booking and any such contractual obligation must be consistent with the 1998 Act and these Regulations.’


Similar changes to local licensing conditions are now expected outside of London following the recent judgment, which in turn would confirm principle booking positions to tax authorities.

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