It is a thing, But Its not A Thing. However, It Could Be a Thing.

UBER v TFL v UTAG v ADCU v FREENOW and The Question of VAT on Fares.

I have been speaking to many colleagues and clients regarding the recent judgement above. I have also had, many of those calls have been from operators simply asking if they will have to add VAT on their fares.

The wording that everybody is getting hot under the collar about is this:

“That in order to operate lawfully under the Private Hire Vehicles (London) Act 1998 a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking.”

“In our judgment, the 1998 Act plainly contemplates that acceptance of a booking by the operator will create a contract between the operator and the passenger and, furthermore, that this will be a contract by which the operator undertakes an obligation as principal to provide the transportation service, that is to say to provide a vehicle and driver to convey the passenger to the agreed destination…The distinction proposed between acceptance of a booking and the undertaking of an obligation to carry out the journey is illusory.” Lord Justice Males

Things are changing week by week but at the moment although my first piece of advice is that any mention of VAT is a matter for you and your accountant, not you and your local authority. However, I can tell you that the VAT issue it isn’t the law as we speak.

A lot has happened in the intervening time between the initial first ruling and now. Most of it in the press, and most importantly of all most of it was personal opinion. From Uber’s PR department to every solicitor with a dog in the fight (and in most cases without), it’s important to realise that it is all currently speculation.

Uber are now taking Sefton Local Authority to court to test whether this ruling will be applied outside of TFL, which although seems to have sparked some fears amongst the noted commentators in passenger transport. However, we need to look at why the ruling was sought, it certainly wasn’t directly about taxation.

TFL has now stepped in and are asking for operators trading models as part of their brief, but this may well mean that the whole mess will have to go to Judicial Review. This whole thing is about contractual and employment law. To be fair if the endgame is that all drivers are forced to become employed, the operators who actually survive this apocalypse would be Principal for VAT purposes. But this hasn’t happened, yet.

At the moment the general response to TFL should be that a trading model recognises that “in order to operate lawfully, operators have and always have had a contractual relationship with drivers and an obligation to the direct duty of care to passengers in tandem with that the driver.

Even my professional colleagues (who to be fair are no private hire experts) seem to be taken in by the use of the word principal, taking it to be a reference to the tax model as opposed to the contractual one.

However, at the moment the VAT rules are specific on who defines and decides. HMRC and tax tribunals not local authorities, and each case is taken on its own merit, which is why HMRC hasn’t and probably won’t comment.

Only time will tell with this but I feel that this is not a time for operators and their advisors to act in haste.

NOTE: This is a personal opinion of the writer and in no way can be taken as advice. I always suggest that people engage the services of a suitably qualified professional (accountant) for prescriptive advice.

This article was originally written for Private Hire Taxi Monthly (PHTM).