Court of Appeal overturns VAT obligation to taxi fares in Uber case
The Court of Appeal has overturned a landmark ruling that all journeys outside of London from private hire taxi firms should be paying VAT, in a judgment that will be seen as a win for the industry.
This case stemmed from a court ruling in 2021 relating to Uber, which said it has to consider its drivers as workers, resulting in the US giant increasing its prices.
Uber tried to fight this ruling in London but lost. The US giant then brought a major lawsuit against Merseyside-based Sefton Council over contract terms for all taxi operators outside of London.
Several private hire operators intervened including Veezu and Delta Merseyside to warn the court of a potential consequence leading to passengers having to pay VAT on private hire journeys, which would see fare hikes of 20 per cent.
As previously, some private hire companies, like Uber, do charge their passengers VAT, but it has been down to the individual firms to decide which business model to use as to whether VAT would apply.
However, in Uber’s case against Sefton Borough Council, the High Court sided with Uber in July 2023, which as a result, took that choice away from the firms.
The two companies that were intervenors in the case, Veezu and Delta Merseyside went on to appeal this decision against Uber. The parties went to court earlier this month, with a decision handed down today.
The Court of Appeal overturned the High Court’s decision, meaning taxi firms in England and Wales – outside of London – will not be forced to apply VAT onto their fares.
The ruling will not impact Uber, who will continue to charge VAT on fares, but will mean many smaller firms can continue to operate as they have previously.
Delta was represented by Aaron and Partners, Veezu had Capital Law while Uber had Hogan Lovells instructed.
While this case was ongoing, the government has launched a consultation on possible options to avert the addition of VAT to all journeys.
Commenting on the decision, Layla Barke-Jones, partner at Aaron and Partners (represented Delta Merseyside), said: “Today’s decision handed down by the Court of Appeal is a victory for the taxi industry and all those who depend on it.”
She explained that “the collective aim for us and our client in this case has always been to protect passengers and taxi firms alike, so the news customers outside London won’t have to have VAT forced upon them will bring a collective sigh of relief.”
“Despite positive economic indications of late, everyone knows that the cost-of-living crisis has hit working families everywhere. The last thing anyone needed was yet another price hike,” she noted.
“Vulnerable consumers caught in the crossfire of Uber’s lawsuit rely on the services offered by taxi firms,” she stated, by adding: “The government recognised the potential impact of the initial High Court judgment by launching a consultation identifying that thousands of firms would need to change their operating model forcing them to now collect VAT from passengers.”
Nia Cooper, chief legal officer at Veezu said: “We are grateful to the Court of Appeal for hearing the case and finding in our favour. The private hire industry is integral to the transport network and provides an income for self-employed driver partners and local private hire operators.”
“The ruling by the Court of Appeal removes the burden on local licensing authorities to invest in unnecessary policy changes and continue with the well established processes already in place,” Cooper added.
An Uber Spokesperson said: “We will review the judgment in detail and consider our next steps. This verdict means that the requirements for operators are now inconsistent between London and the rest of England and Wales.”