Taxis and private hire cars
1.1 What is this notice about?
This notice explains how VAT applies to the taxi and private hire car trade. The contact address has been updated and new paragraphs explaining your rights and obligations and how HM Revenue and Customs uses your information have been added. The technical content hasn't changed from the May 2002 edition.
Private hire cars include what are often referred to as “mini-cabs”. You should read this notice if you are—
— a driver who owns or rents a vehicle (an “owner driver”);
— the owner of a business which operates a number of vehicles; or
— operating a taxi association.
1.2 What's liable to VAT
The fares you charge to your passengers for taxi or private hire journeys are liable to VAT at the standard rate. This also includes any additional charges you may make such as for—
— baggage; or
— waiting time.
Other sources of income liable to VAT may include—
— referral fees received from another taxi firm (where, for example, you have passed business on to them);
— charges for supplying fuel or the rental of vehicles and/or radios to drivers; and
— administration charges to customers (for example where you provide them with periodic details of the journeys they have made).
On the other hand, tips or gratuities that are voluntarily given by passengers are not regarded as payment for a supply and are therefore outside the scope of VAT.
Where your charges are VAT inclusive, you can work out