A landmark court ruling over who holds the principality in a private hire booking will ‘have little to no effect on the industry at all’ says national industry representatives.
Sefton Council and several local minicab operators had sought to defend the current arrangements where the contract for minicab transport was deemed to be between the driver and passengers rather than between the operator and passengers. Uber and the App Drivers & Couriers Union (ADCU) however successfully defeated their opponents in the landmark ruling, which is set to change the landscape of the private hire vehicle (PHV) sector.
The ADCU had previously defeated Uber in a similar action in the High Court in 2021, leading to changes in Uber's business model. Uber was forced to contract directly with passengers instead of acting as an agent, confirming the status of drivers as workers with statutory protections. Additionally, as Uber became the principal party, it became liable for VAT, resulting in a settlement with HMRC for back VAT payment of £615 million. That total has since risen by another £386 million, but this additional claim is being appealed and disputed by Uber.
The recent ruling aimed to extend the declaration imposed on Uber for London to cover the rest of England and Wales, in an attempt to level the competitive playing field nationally. This move was contested by the Veezu Group, Delta Merseyside, and a coalition of operators they claimed to represent.
While large app-based operators such as Uber, Bolt, and FreeNow have already implemented these changes across England and Wales, as well as London, the court ruling mandates that all other operators must adhere to the same principle regulations.
However, a spokesperson from the National Private Hire and Taxi Association (NPHTA) downplayed the impact of the ruling, stating: "In truth, it will have little to no effect on the industry at all.
“Those who are registered for VAT have already been paying, those are under the threshold will not be affected at all, since it was not a VAT case, in fact in both the Sefton case and the London case, the judges both clearly stated that VAT was not relevant nor was it argued in the cases.”
Layla Barke-Jones, a Partner in the Dispute Resolution team at the law firm Aaron & Partners, acted on behalf of a group of Liverpool-based taxi firms, including Delta Taxis.
She said: “Without a doubt, the case has the potential to cause significantly increased costs that will hit passengers everywhere at the time of a cost of living crisis.
“Delta had hoped to protect passengers from such an impact, and will now call on Government to make private hire taxi journeys zero rated for tax purposes, in line with other forms of transport like buses and trains, to prevent this impact on some of the most vulnerable in society for whom private hire taxis can be the only form of transport available to them.”
Ms Barke-Jones added: “It is important to remember that this case was not about Delta’s tax liability but the potential for HMRC to require Delta to collect vat for HMRC.
“VAT is charged to the passengers and passed to the government. Delta’s stance in this case has been to try to protect the passengers. Given the potential for such large fare increases this now requires urgent government action to prevent VAT from being charged on private hire fares.”
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