Uber’s challenge to the licensing of private hire operators finally runs out of road
Jonathan Main · Posted on: August 14th 2025 · read
Who should read this?
Anyone with an interest in the VAT obligations for private hire operators (“PHOs”).
The Supreme Court handed down its judgment in the case of D.E.L.T.A. Merseyside Limited and another (Respondents) v Uber Britannia Limited (Appellant) [2025] UKSC 31 on 29 July 2025. This article summarises the implications of the decision from a VAT perspective.
Uber sought the Supreme Court’s agreement that PHOs regulated by Part II of the Local Government (Miscellaneous Provisions) Act 1976 (“The 1976 Act”) are required in all cases to contract as principal for the journey booked by the passenger. The 1976 Act governs the licensing requirements for PHOs based outside London and Plymouth.
What does this mean for private hire operators’ VAT bills?
"Uber failed to convince the Supreme Court, which agreed with the ruling from the Court of Appeal in July 2024. In short, PHOs licensed under the 1976 Act can continue to choose whether to use an agency or principal contracting model for journeys booked by passengers."
The VAT implications
HMRC VAT Notice 700/25, “How VAT applies to taxis and private hire cars”, provides VAT guidance for the private hire sector. The VAT Notice makes it clear that PHOs can act either as agent or principal in providing private hire journeys to passengers.
- As principal, the PHO is required to pay VAT on the full fare paid by the passenger.
- As agent, the PHO accounts for VAT on the fees charged to drivers for providing access to passenger bookings, together with any fees for other services such as vehicle rental.
For agency work, the driver is responsible for paying VAT on the fare paid by the passenger. If drivers earn more than the £90,000 VAT registration threshold in any 12 month period, they should register for VAT.
The Supreme Court decision preserves the status quo under the 1976 Act and PHOs outside London can continue to choose the contracting model that best suits their business.
Unfortunately, this is not the end of the story. PHOs licensed within London are regulated by a later, differently worded but similar scheme under the Private Vehicles (London) Act 1998 (“The 1998 Act”), which requires all journeys to be contracted as principal with operators liable for VAT on the full fare paid by the passenger.
This discrepancy between the 1976 and 1998 Acts leaves open the very unsatisfactory possibility of VAT rate shopping within the UK, if a PHO licensed outside London can use an agency model to compete against a London licensed operator paying VAT in full.
So, what happens now?
HM Treasury (“HMT”) launched a consultation entitled the “VAT Treatment of Private Hire Vehicles” in April 2024. HMT’s response to the submissions made during the consultation has been parked pending the final outcome of the litigation just decided at the Supreme Court.
At the same time, Bolt Services UK Ltd (“Bolt”) is involved in litigation with HMRC over the correct VAT treatment of income received for its ride hailing services. The latest judgment in favour of Bolt was issued by the Upper Tribunal (“UT”) in March 2025, Bolt Services UK Ltd v Revenue and Customs Commissioners [2025] UKUT 100 (TCC). Subject to HMRC overturning the decision of the UT, Bolt is required to pay VAT on the profit it earns after paying its drivers, rather than the full fare paid by the passenger, a considerable VAT saving. Bolt is using the Tour Operators Margin Scheme (“TOMS”) to achieve this VAT saving.
HMT and HMRC have several decisions to make:
- HMT is required to respond to the consultation it launched in April 2024.
- As part of that response, HMT should address the possibility of VAT rate shopping within the UK.
- HMRC must decide whether to accept or continue to challenge the Bolt decision in the UT.
Subject to HMRC overturning the decision of the UT, Bolt is required to pay VAT on the profit it earns after paying its drivers, rather than the full fare paid by the passenger, a considerable VAT saving. Bolt is using the Tour Operators Margin Scheme (“TOMS”) to achieve this VAT saving.
One of the options discussed in the HMT consultation is the introduction of a margin scheme, which is similar to TOMS.
Could HMRC decide not to challenge Bolt in the Court of Appeal, allowing HMT to endorse the margin scheme as an option for all PHOs across the UK?
With the Supreme Court’s judgment now final, the legal position for private hire operators outside London is clear, for now. But uncertainty remains. The ongoing VAT disparity between jurisdictions, HMRC’s next move in the Bolt litigation, and HMT’s long-awaited consultation response all signal that further change may be on the horizon. PHOs should stay alert to developments and consider how their current contracting model aligns with potential future reforms.
If you have questions about how this ruling, or the broader VAT landscape affects your business, our team can help you assess your position and prepare for what comes next. Get in touch with us to discuss your options.
