How could VAT increase impact the competitiveness of PHVs against traditional taxis?

How will the proposed VAT increase impact the competitiveness of private hire vehicles against traditional taxis and other forms of public transport?

Traditional taxis hailed off ranks and in the street will not be rising their tariffs set by local authorities and are NOT affected by the change in circumstances.

The introduction of a 20% VAT on private hire vehicle fares could significantly alter the competitive landscape within the transport sector.

Private hire services, particularly those offered by companies like Bolt and other local operators, may become less attractive compared to traditional taxis, which are not subject to the proposed VAT increase and thus can maintain lower fares.

Furthermore, the higher costs associated with private hire vehicles could push consumers towards other forms of public transport, such as buses and trains, or encourage the use of alternative transport options like biking or walking for short distances.

The Chancellor of the Exchequer, Jeremy Hunt, has already committed to consult on the VAT treatment of Private Hire Vehicles (PHV) in early 2024. The announcement was made in the Autumn statement.

The VAT requirements have changed following a recent High Court ruling in the case of Uber Britannia Ltd v Sefton MBC, which inadvertently triggered tax regulations requiring 20% VAT on private hire fares for the first time in the industry's history. This change has raised concerns among private hire operators across England, who have been lobbying for a 0% VAT status for PHV journeys.