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Private hire vehicle firm now calling on Government to ‘ZERO-RATE’ VAT following landmark ruling

Circle image credit: HMRC

Private hire vehicle (PHV) firms outside London could now be forced to raise their prices by up to a fifth, after Uber brought a claim in the high court meaning passengers must pay VAT on journeys.

There are now calls on the Government to step in and prevent the rise, which comes amid the cost of living crisis currently hitting the UK.

The decision follows a major lawsuit launched by ride sharing app Uber and involving Sefton Council, and means the entire private hire industry could now be forced to add the charge to their fares for the first time.

The case in the High Court began hearing submissions at the end of 2022, and after a long delay, the decision was handed down by Mrs Justice Foster DBE yesterday.

Layla Barke-Jones, a Partner in the Dispute Resolution team at the law firm Aaron & Partners, is acting 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 said the outcome had been “heavily influenced” by a previous case relating to Private Hire Vehicles operating in London, which Uber was also involved in.

She said: “We are disappointed at the outcome and are taking time to consider and reflect upon the judgment. We respect the judge’s findings but are considering the impact with our client including whether to appeal."

The case comes after Uber revealed last year it was to hand £615m in tax to UK authorities – following the settlement of unpaid VAT.

The ride hailing app had argued in the past that it was exempt from paying VAT with its drivers classified as self-employed. A landmark court ruling later clarified its drivers were indeed classed as ‘workers’.

With Uber’s revenue massively exceeding the VAT threshold, the company started to charge passengers an additional 20% to cover VAT. Uber wanted UK private hire and taxi firms to do the same, and have now been successful in its legal bid which may force them to do so.

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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