Private hire operators lobby Chancellor for 0% VAT status to protect industry potentially collapsing

Private hire operators across England are preparing to lobby Chancellor of the Exchequer, Jeremy Hunt, in an attempt to secure a 0% VAT status for private hire journeys.

The operators, including some of the country's largest PHV companies, have targeted a change in tax status as key to protect the future of the industry and ensure passengers are not burdened with potential 20% fare hikes.

A draft of the joint letter, obtained by TaxiPoint earlier this month, highlighted the recent Uber versus Sefton Borough Council judgment and emphasises the potential consequences for the sector. The letter, expected to be backed by a significant number of major players in the industry, states that the authorities need to recognise the significance of this issue and take immediate action to preserve the livelihoods of thousands of drivers and prevent substantial price increases for passengers.

Today, that letter was made public. Stakeholders within the private hire industry have been circulating the letter encouraging more operators to sign.

As a by-product of the ruling in the Uber case it inadvertently triggers tax regulations requiring 20% VAT on private hire fares for the first time in the industry's history, even though licensing laws have been in place for almost half a century. This change has raised concerns about declining demand, reduced driver earnings, and limited transportation options for passengers, directly linked to the licensing legislation determining the VAT status of journeys.

The signatories of the letter, who are collectively likely to be responsible for operating over half of all private hire journeys in the UK, argue that imposing a 20% VAT on fares in the current economic climate would have devastating consequences. The proposed fare increase could disproportionately impact communities heavily reliant on private hire services, especially in areas where access to public transport options is limited. It is feared that smaller operators may be forced to close, resulting in reduced connectivity and passenger choice.

To address these concerns the collective plea is for the VAT status of private hire journeys to remain at 0%, aligning it with other forms of passenger transport. This proposed solution would not burden the Treasury with any additional costs and would safeguard millions of passengers and thousands of drivers across England.

Private hire operators behind the letter are adamant that ‘urgent intervention’ from the Government is necessary to prevent the potential collapse of the transportation network outside of London and major cities. If fares become unaffordable and drivers are forced to leave the industry, it will cause a domino effect, ultimately impacting even those passengers who can still afford private hire services.

The letter concludes with a request for a meeting with Chancellor Jeremy Hunt and his officials, highlighting the importance of safeguarding the industry's future and discussing potential solutions.