VAT Relief for Wheelchair Accessible Taxis: What would it mean for the UK taxi industry?

In a significant recent development for London's transportation sector, the Mayor, with support from Transport for London (TfL), has approached the Treasury seeking pivotal support measures for taxi vehicle owners that could affect cabbies throughout England.

This move includes proposals such as extending the Plug-in Taxi Grant (PiTG) beyond its March 2024 expiration, introducing VAT relief on taxi purchases designated as wheelchair accessible vehicles (WAVs), and aligning VAT on on-street vehicle charging for taxis and private hire vehicles (PHVs) with home charging rates.

Central to this initiative is the proposal to eliminate Value Added Tax (VAT) on electric WAV taxis, a measure advocated by several industry experts throughout the UK. By removing the VAT, currently pegged at 20% of a vehicle's value, the cost disparity between electric and internal combustion engine vehicles could be significantly reduced. This change could help encourage more licensed taxis and drivers on UK roads, a sector currently hampered by elevated operating costs and falling driver numbers.

The scheme would also align with existing VAT exemptions tailored for disabled individuals. Under the current regulations, VAT relief is available for vehicles adapted for wheelchair users, provided they meet HM Revenue and Customs (HMRC) criteria. This relief encompasses vehicles designed or substantially adapted for safe and comfortable travel for disabled wheelchair users.

Extending this VAT relief to WAV taxi services could lead to savings exceeding £10,000 for new LEVC TX taxis - a popular model among taxi drivers. This substantial cost reduction could make the taxi profession more appealing and accelerate the adoption of eco-friendly vehicles in taxi fleets nationwide.

This proposal addresses the ongoing debate among taxi drivers over the fairness of VAT, especially for those operating WAVs. By reducing the VAT burden, taxi drivers would be incentivised to shift from traditional vehicles to electric variants, fostering a cleaner, more sustainable transport system. Moreover, the operational savings from electric vehicles, combined with tax relief, would make WAV taxis a financially viable option.

In addition to environmental benefits, increasing the number of EV taxis would improve transportation accessibility for disabled passengers. A higher number of WAV taxis would enhance mobility options for individuals with disabilities, promoting inclusivity and convenience.

By encouraging WAV taxis, the authorities aim to achieve a greener transport sector while ensuring equitable access for disabled individuals.

In a related move, ministers have urged local councils to heed new government guidelines aimed at improving taxi and minicab accessibility. These guidelines stress the importance of action against drivers who discriminate against people with disabilities and guide dog owners, with penalties including fines and licence suspensions. Councils are also crucially encouraged to better promote the uptake of wheelchair accessible vehicles and ensure a balanced mix of vehicles to cater to community needs.

This holistic approach, combining tax relief with regulatory measures, represents a strategic push towards creating a more inclusive, environmentally conscious, and financially viable taxi industry.

Will it finally happen? That’s all down to the Government.