Taxi | D.E.L.T.A. Merseyside Ltd, Veezu Holdings Ltd and Uber Britannia Ltd

Private Hire Vehicle (PHV) Operators inside and outside of London are governed by different legislation.

An earlier Court decision, affecting the London trade, requires Operators to enter as principal into a contractual obligation with the passenger to provide the journey. This means that a VAT obligation arises for PHV Operators.  Subsequent to the London decision, Uber Britannia Ltd brought a case in which it sought a declaration from the Court that PHV Operators outside of London (excluding Portsmouth, which has its own distinct legislation) were also required to enter as principal to be deemed to be acting lawfully.

Foster J sitting in the High Court agreed with Uber and made the relevant declaration on the 28^th July 2023.  The declaration required licensed Operators who accept a booking for a passenger to enter “as principal into a contractual obligation with the passenger to provide the journey which is the subject to the booking.”

One effect of the declaration related to the application of VAT to PHV Operators.  For nearly 50 years, since the implantation of Part II of the Local Government (Miscellaneous Provisions) Act 1976, which regulated PHV Operators outside of London, many PHV Operators had operated an agency model which did not require VAT to be applied to the relevant transactions.     The addition of VAT at 20% would have been a very significant cost to Operators and would, at least in part, have been passed onto passengers. 

This morning (15^th July), the Court of Appeal unanimously discharged the High Court declaration confirming that PHV operators are not required to contract with passengers for the provision of journeys, and the agency model, which avoided a VAT obligation for the Operator, is lawful.

We expect this will come as a great relief to the trade outside of London and their passengers.