Treasury rules out further VAT reforms for taxi and private hire sector following recent TOMS clampdown
- Perry Richardson
- 2 hours ago
- 2 min read
The Government has signalled that no further reforms are planned to the VAT treatment of taxi and private hire vehicle services, following a Parliamentary question on whether additional changes were under consideration.
Responding in a written answer, Exchequer Secretary to the Treasury Dan Tomlinson confirmed that private hire vehicle (PHV) services supplied by VAT registered businesses remain subject to the standard rate of VAT at 20 percent, a position he said has always applied.
The response was issued after Andrew Snowden MP asked the Chancellor whether she intended to bring forward further reforms to VAT treatment within the taxi and private hire vehicle sector.
Tomlinson said the Government’s Autumn Budget 2025 measures were designed to end the exploitation of a VAT administration scheme originally intended for tour operators (TOMS). He said a small number of large private hire vehicle operators had used the scheme to reduce their effective VAT rate compared with competitors.
Ministers say existing VAT rules already apply and recent Budget changes have closed a loophole used by a small number of large PHV operators
According to the Treasury, the Budget changes were aimed at restoring consistency in VAT treatment across the sector rather than introducing new tax burdens. Ministers argue that the reforms ensure larger PHV operators cannot gain a tax advantage by using arrangements not designed for ride-hailing services.
The Government stressed that the changes do not affect smaller operators outside London where drivers typically contract directly with passengers. It also confirmed that licensed taxis, including black cabs, are unaffected, noting that these parts of the trade had not sought to use the tour operator VAT scheme.
The Autumn Budget changes around TOMS was broadly welcomed by much of the taxi and PHV industry, which has long argued that uneven VAT treatment between large app-based PHV firms and traditional operators distorts competition.
By ruling out additional changes, the Treasury appears to be signalling that it considers the Autumn Budget reforms sufficient to address perceived abuses, at least for the current Parliament. However, the VAT position of PHV operators outside of London remains a sensitive issue.
Tomlinson said: “Private hire vehicle (PHV) services provided by VAT-registered businesses are, and always have been, subject to the standard rate of VAT (20%).
“The Government’s announcement at Autumn Budget 2025 puts an end to the exploitation of a VAT administration scheme, designed for the tour operator sector, by a small number of large private hire vehicle operators seeking to pay a lower rate of VAT than others.
“This won’t affect smaller operators outside London whose drivers contract directly with passengers, or black cabs, neither of which have attempted to exploit this scheme.”
