PHV VAT CONFIRMED: Chancellor Reeves applies VAT expansion to all private hire trips in today’s Autumn Budget
- Perry Richardson
- 4 minutes ago
- 3 min read
The Chancellor has confirmed that full rate VAT to all private hire journeys will now apply, triggering an immediate reaction across the taxi and PHV industry, with the Licensed Taxi Drivers’ Association (LTDA) describing the shift as a defining moment in the long battle over tax treatment within the sector.
The policy closes the long-contested Tour Operators Margin Scheme (TOMS) exemption that some large operators have used for nearly a decade to reduce their VAT exposure. Under TOMS, some platforms have been able to pay an effective VAT rate far below the standard 20 percent, a position that smaller UK operators have argued distorted competition and placed them at a structural disadvantage.
Steve McNamara, General Secretary of the LTDA, said the loophole had allowed major platforms to contribute “less than 5 per cent” VAT on vast revenues, a practice he believes has cost the UK taxpayer billions.
By moving all private hire journeys into the standard VAT regime, Chancellor Rachel Reeves has signalled that the long period of inconsistent tax treatment should come to an end. The Government has been reviewing the legal and economic implications of TOMS for several years, with court challenges and HMRC rulings creating an uncertain environment for operators, drivers and local authorities. Today’s announcement provides clarity on the direction of travel, though the operational and pricing implications will take time to filter through.
Move ends long-running TOMS dispute and is set to reshape costs and competition across the UK’s Taxi and PHV sector
The policy is expected to influence the entire private hire supply chain. Operators using TOMS will now need to absorb the additional VAT cost, pass it on to passengers, renegotiate driver contractual terms or reconfigure their business models. The scale of the financial impact will vary by operator, but PHV prices could rise as the sector aligns with the traditional VAT structure used in most other comparable services.
For drivers, the effect remains uncertain. There are warnings that operators facing higher VAT bills may seek to recover costs from drivers through adjusted commission or fee structures.
Passenger demand may also shift. Any fare increases tied to VAT could influence trip volumes, particularly in price-sensitive urban and suburban markets where ride-hailing has become a core part of the transport mix. The Government has not yet set out any transitional mechanism, giving operators limited time to prepare for the fiscal change once the full implementation timetable is confirmed.
McNamara called the decision “a victory for common sense” and said the LTDA welcomes the Government’s commitment to closing the gap between small domestic firms and multinational operators. He framed the reform not only as a tax correction but as a rebalancing of a market that he argues has been distorted for too long.
McNamara said in full: “Today’s decision by the Government to apply VAT to all private hire journeys is a landmark moment for fairness and integrity in our industry.
“For years, multinational behemoths like Uber and other companies with staggering global wealth and resources have exploited the Tour Operators Margin Scheme (TOMS) loophole, a mechanism designed for traditional travel companies, to pay an effective VAT rate of less than 5% on billions in revenue. This has cost the British taxpayer billions to date, creating a grossly uneven playing field for tens of thousands of small operators who have always complied with the rules.
“This change is not just about tax. It is about restoring balance to a market that has been distorted for far too long. Drivers and small businesses have been competing against global corporations that enjoy special treatment, while hardworking operators pay the full 20% VAT rate. Today’s announcement finally levels that playing field and ensures competition is based on service and quality, not tax avoidance.
“We welcome this decision and congratulate the Government on taking this decisive action to close the loophole. This is a victory for common sense, for fairness, and for the thousands of our drivers who have been disadvantaged for years.”
More details and trade response to follow…
