VAT and private hire - What does the Bolt Services Ltd VAT win mean for me?
Jonathan Main · January 16th 2024 · read
In previous articles on our website, I have provided detailed commentary on the implications of Uber judgments on worker status and licensing requirements in cases against Transport for London and Sefton Council. I have also highlighted the implications of the forthcoming HM Treasury consultation on the VAT treatment of private hire revenue.
Please refer to those insight pieces for background to this latest significant development following the success at First-tier Tribunal for Bolt Services UK Ltd (“Bolt”) in a decision published on 15 December 2023.
In the decision, Bolt accepted it acted as principal in the provision of passenger journeys, that its ride hailing services were subject to VAT, and that it was liable to account for VAT by reference to the full fare paid by the passenger. The only question for the court was the basis on which it should calculate its VAT liability.
The case was decided by Judge Greg Sinfield, the President of the First-tier Tax Tribunal. Judge Sinfield agreed with Bolt, that it should pay VAT using the Tour Operators’ Margin Scheme (“TOMS”). This means Bolt pays VAT on its gross margin, being the margin between the fare paid by the passenger and the amount retained by the driver. This is a significant victory.
A few months prior to the Bolt decision, Judge Sinfield heard a case (“Sonder Europe”) concerning the supply of serviced accommodation and reached the same decision, that TOMS should apply to the calculation of the VAT due.
- HMRC intend to appeal.
- HMRC have already appealed Sonder Europe.
- The President of the Tribunal has made two high profile decisions on the same VAT law, which may increase the chances of success by the taxpayer on appeal.
- For reasons explained in previous insights, unless a private hire operator is based in London or is already acting as principal, the Bolt decision has no immediate impact. The operator should continue to act as agent and pay VAT in accordance with HMRC guidance.
What about Uber?
I understand that Uber is due to take a VAT case to the Tribunal in the first half of 2024 and that it will also argue that it should pay VAT using TOMS.
I am not foolish enough to guess the outcome of a case without being involved in it and certainly not before the hearing. It is much easier to read the decision and then decide whether I agree with it! There are though a few interesting points to bear in mind:
- Bolt and Uber are being heard separately. The courts are keen to save time and resource either by joining similar appeals together or agreeing a lead case. I assume that did not happen here, because they are not similar enough.
- Judge Sinfield accepted that the Bolt drivers were “independent contractors”.
- Following Uber v Aslam, Uber’s drivers are workers.
- It is well established that an employee cannot provide services separate to their employer whereas a self-employed person is subject to VAT in their own right.
- There is no established UK case law or HMRC guidance on the VAT status of a worker and whether they are akin to an employee. This may be a key issue to decide at the Uber hearing.
These points may not be sufficient for the Tribunal to reach a different conclusion. They are at least sufficient not to just assume Uber wins, because Bolt won.
- If you operate in London, Bolt is good news if your drivers are “independent contractors”. Far from settled, as HMRC will appeal but at least a step in the right direction. You might like to think about a protective claim for overpaid VAT which will be paid out if Bolt succeeds at a higher court and your facts are sufficiently similar.
- If you operate in the rest of England and Wales, carry on acting as agent if you can and it suits your business.
- Keep the pressure on to secure the zero or a reduced rate of VAT for private hire, as it is a better option compared to the uncertainty of litigation involving Bolt and Uber.