Taxis and private hire businesses

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Taxis and private hire businesses
  • VAT treatment
  • Drivers
  • Taxi or private hire firms
  • Controllers
  • Account work
  • Taxi associations
  • Buying and selling a taxi or private hire vehicle
  • Buying a motor car
  • Selling a motor car
  • More...

Taxis and private hire businesses

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of the VAT treatment of supplies made by taxi and private hire or mini cab businesses.

VAT treatment

Zero-rating of domestic passenger transport does not apply if the vehicle is designed to carry less than 10 passengers. Therefore, the fares charged to passengers using a taxi or private hire vehicle are likely to be liable to VAT at the standard rate, including any additional charges levied for waiting times, baggage, etc if the business providing the service is registered for VAT

Firms may also receive additional income from the following sources (this list is not exhaustive):

  1. referral fees received from other firms

  2. fuel charges

  3. vehicle rental charges

  4. administration charges

If the customer voluntarily gives a gratuity to the driver, the amount is not regarded as consideration from a VAT perspective, therefore no VAT needs to be accounted for on these amounts.

The VAT due will be calculated on the taxable items by multiplying the fares, including extras, by the VAT fraction (currently 1/6 for items liable to VAT at 20%).

The issue of whether recharges of insurance costs to drivers leasing a vehicle from the firm were liable to VAT, as a single composite supply of services or exempt from VAT, was recently the subject of a tribunal case in Wheels Private Hire Ltd (WPH). In this case, WPH operated a taxi hire business and it also rented a number of vehicles to certain drivers who did not have their own vehicle together with

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