Taxi for Uber

The UK Supreme Court has ruled that private hire vehicle (PHV) operators outside London are not required to pay 20% VAT on fares, delivering a major victory to Uber’s rivals in a long running legal dispute.

The case centred on whether PHV operators enter into contracts directly with passengers – in plain English, were the passengers engaging the driver or the taxi firm.

The dispute followed a 2021 Supreme Court ruling that classified Uber drivers as workers, increasing the company’s tax obligations.  Following this case, Uber were deemed to be the principal in their transactions and as such the total income was subject to VAT.  Seeking equity across the private hire sector, Uber then sought a declaration that all PHV operators contract with passengers – and therefore all firms should be liable to VAT.

The firms traditional model was to structure the position that the drivers were all self-employed.  That meant that a driver earning under £90k could potentially be below the VAT registration threshold.  The firms themselves may be charging those self-employed drivers a fee, perhaps for radio hire, etc. 

Uber first won their case at the High Court ruling in 2023.  However, this was overturned at the Court of Appeal in 2024, and now definitively rejected by the Supreme Court.

The Supreme Court unanimously found in favour of the other PHV operators, confirming that where set up appropriately they would not be the principal or contracting party, and therefore not subject to VAT in the same way. 

This is good news for all PHV operators working outwith an Uber style model, however would stress that this will be very much dependent on implementation – the devil’s in the detail!