Good news for Uber, they have won their case at the High Court against Sefton Metropolitan Borough Council, in Merseyside. Uber had argued that to operate private hire vehicle businesses (outside of London and Plymouth) (PHV firms), the operators of such businesses had to be principals in the contracts with the passengers booking the transport services as this was a requirement of the underlying regulatory legislation passed in 1976.
This has significant VAT implications in England and Wales. Where operators of PHV firms act as principal they are required to charge VAT on the whole of the of the charge to the customer, not just on any charges to the driver of the private hire vehicle.
For many years, HMRC have accepted that where PHV firms operate as a disclosed agent for a self-employed driver that it was the self-employed driver’s responsibility to account for VAT. As most drivers’ gross income would be beneath the VAT registration limit then most drivers wouldn’t charge VAT.
Uber recently lost its appeal at the Supreme Court that confirmed that Uber was principal for fares it earned in London and therefore the drivers in London were workers for the purpose of certain employment law rights. Uber held that the legislation that applied in London was similar to the legislation that applied in the remainder of England and Wales (excluding Plymouth). Uber held that where a PHV firm operates outside of the London and Plymouth and holds a relevant licence to accept a booking then they are principal in the contract with the end-passenger irrespective of whether they subcontract the work to another firm or driver.
The High Court agreed with Uber, finding that the legislation did indeed require the PHV firm to be principal in the contract with the end-passenger. The High Court found that one the purposes of the 1976 legislation was to provide protection to the public and therefore placing the onus on PHV firms to maintain records and be principal in the contract was in line with Parliament’s intention.
The decision can be found at: Uber Britannia Limited v Sefton Metropolitan Borough Council & Ors – Find case law (nationalarchives.gov.uk)
This judgement, if not appealed, will require all PHV firms to charge VAT on the whole charge to the end-passenger though is unlikely to rise prices for the individual consumer to a great extent due to the fierce competition within the industry. It will require all England and Wales licenced PHV firms to change their business models where they do not consider themselves to be principal in the contact with the end-passenger. The judgement should make competition fairer since all firms will have the same VAT treatment along with enhancing the employment rights of non-London based drivers.
Determining whether supplies are standard-rated, reduced rate-rated, zero-rated or exempt can be problematic, but this is a matter that we are experienced with. The cut-off between the varying rates or exemption points can be difficult to identify. Please let us know if you would like assistance with determining the VAT treatment of transactions or if you have compliance related issues.
