VAT IMPACT: Government to publish potential implications of ‘Uber Britannia vs Sefton MBC’ ruling in April
The Chancellor of the Exchequer's announcement in the Spring Budget 2024 has set the stage for a pivotal moment in the UK's private hire vehicle (PHV) industry.
The Government's commitment to publish a consultation in April on the implications of the High Court's ruling in the case of 'Uber Britannia vs Sefton MBC' comes as the legal battle heads to the Court of Appeal.
Section 2.26 of the Spring Budget 2024 marked ‘VAT Treatment of Private Hire Vehicles’ stated: ‘As announced at Autumn Statement 2023, the government will publish a consultation on the potential implications of the High Court’s ruling in ‘Uber Britannia vs Sefton MBC’ in April 2024.’
The appeal, scheduled for 9 or 10 July 2024, challenges a decision that could redefine the operational frameworks of ride-hail services across the nation.
This legal saga dates back to a High Court ruling affirming that private hire operators, rather than individual drivers, should hold contracts with passengers for journeys booked under the Local Government (Miscellaneous Provisions) Act 1976. The verdict aligned with the principle that the contractual relationship in private hire bookings is between the operator and the passenger, directly contesting the position advocated by Sefton Council and similar regional operators.
The significance of this legal interpretation was underscored by a 2021 case where the App Drivers & Couriers Union (ADCU) emerged victorious against Uber under London-specific legislation. This outcome mandated Uber to revise its business model, recognising drivers as workers with entitlements to statutory protections and making the company liable for VAT, given its principal status in transactions.
This shift marked a departure from Uber's previous practice of classifying drivers as principals, which exempted the service from VAT obligations since individual drivers seldom meet the £85,000 threshold. However, in a move to comply with tax obligations, Uber settled a hefty £615 million in back VAT payments with HMRC on 31 October 2022, spotlighting the financial implications of these legal interpretations.
The upcoming appeal and the Government's planned publication next month, indicates a critical juncture for the PHV industry. Operators nationwide, apprehensive about the broader impact of VAT on their operations, are advocating for a zero-rated VAT status to mitigate potential financial strain.
