United Kingdom to Change VAT Treatment of Taxi and Private-Hire Fares Supplied Through Agents

Summary

From 2 January 2028, qualifying taxi and private-hire services supplied through an agent will be deemed to be supplied to and by that agent.

A VAT-registered operator within scope will account for VAT on the full fare rather than only on its commission or agency fee.

The measure is aimed at larger operators; the government will consult on the turnover threshold, with £50 million annual fare turnover identified as the lead option.

Extended article

The UK government has announced a targeted change to the VAT treatment of taxi and private-hire vehicle services supplied through agency models. From 2 January 2028, section 47 of the VAT Act 1994 is to be amended so that qualifying passenger transport services supplied through an agent are treated as a supply to the agent and a corresponding supply by the agent to the passenger.

The effect is significant for operators using agency structures. Where the operator is VAT registered, it will account for VAT on the full value of the fare rather than only on the commission or fee charged to the driver. The reform is intended to address differences between London, where private-hire operators are required to act as principal, and arrangements outside London where an operator may act as agent for the driver.

The measure is designed to apply to larger businesses. The government will consult on the threshold and has identified £50 million of annual fare turnover as the lead option. Smaller operators below the eventual threshold would therefore remain outside the deeming rule.

Affected businesses should review whether contractual terms, booking flows, payment collection and customer-facing documentation describe the operator as agent or principal. They should also model the impact of VAT on the full fare, including pricing, driver remuneration, recoverability of input VAT, invoice and receipt formats, platform reporting and data needed to calculate taxable turnover. Because the final threshold and design remain subject to consultation, the announced rule should be treated as a firm policy direction with implementation details still to be completed.

External sources: External sources: HMRC tax information and impact note | Detailed HMRC policy paper | HMRC VAT Notice 700: the VAT guide

United Kingdom changes VAT treatment for private hire vehicle operators

From 2 January 2028, VAT treatment for passenger transport services provided via taxi or private hire vehicle through larger operators will change so the operator, not the driver, is treated as supplying the service.
In scope, the operator will charge VAT on the full fare.
The change will apply only to operators whose annual fare turnover exceeds a yet-to-be-set threshold.
The government will consult on the threshold and detailed design, with £50 million annual fare turnover as the lead option.

Source: icaew.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.