"At the centre of the dispute is the tour operators' margin scheme, which allows eligible businesses to pay VAT only on their profit margin rather than the full value of a service. Originally designed for holiday and coach tour companies, the scheme has also been used by ride-hailing platforms. According to the Treasury, this reduced the effective VAT rate paid by some operators to as little as 4%, compared with the standard 20% rate."
"The impact will be felt most sharply in London because of rules set by Transport for London, which require ride-hailing firms to act as the principal in transactions rather than as booking agents. Outside the capital, Uber has moved to clarify that it operates as an agent, meaning VAT is only charged on the commission it earns, with drivers treated as the supplier of transport services. Most drivers fall below the VAT registration threshold, limiting overall tax exposure."
"The change, announced by Chancellor Rachel Reeves in November's Budget, will hit companies such as Uber and Bolt, which have previously used a tax scheme intended for tour operators to reduce their VAT bills. Ministers argue the move will level the playing field for London's black cab drivers, while Uber has warned it will result in higher prices for passengers in the capital."
The government will exclude suppliers of private hire vehicle and taxi services from the tour operators' margin VAT scheme. The change, announced in the November Budget, targets firms such as Uber and Bolt and is expected to raise around £700 million a year for the Exchequer. The margin scheme allowed VAT to be paid only on profit margins, cutting some operators' effective VAT to as little as 4% versus the standard 20%. Transport for London rules make the impact most acute in London because platforms must act as the principal, exposing full fares to VAT, while outside London many operators act as agents and drivers often fall below VAT registration thresholds.
Read at Business Matters
Unable to calculate read time
Collection
[
|
...
]