In April 2024, the government asked for views on actions it could take to limit the impact of recent High Court judgements involving Uber on the PHV sector and its passengers.  The options considered included amending transport or VAT legislation to avoid VAT at the standard rate being charged on all PHV fares.  

ICAEW’s Tax Faculty has responded to the consultation. In July 2024, the Court of Appeal overturned a judgement of the High Court (DELTA Merseyside Limited and Anor v Uber Britannia Limited [2024] EWCA Civ 802). The faculty believes that this decision significantly alters the context of the government's consultation. ICAEW’s response should be read with this evolving legal context in mind. Some specific points may need to be reconsidered depending on the final legal position.  

The faculty does not support the amendment of PHV legislation solely to address VAT issues. Moving to a single-tier system for taxis and PHVs risks distorting the market, reducing consumer choice, and compromising passenger safety. Furthermore, ICAEW advises against creating a ‘legal fiction’ where PHV operators act as principal for providing the services but as agents for VAT purposes. This could lead to confusion and increased compliance costs.  

The faculty has reservations about the proposed options of introducing a reduced/zero rate for the services or a sector-specific margin scheme. These options would introduce unnecessary complexity into the tax system, and there is no guarantee that the VAT savings would be passed onto consumers.  

The consultation sets out a number targeted interventions to support vulnerable consumers. ICAEW recommends that these measures are explored further. More support for community transport schemes and expanding eligibility for disabled person’s bus passes would help the people who need it most. This could be done without compromising the integrity of the broader tax system.