Court of Appeal rules against Uber over application of VAT to taxi fares

The Court of Appeal has today (July 15) ruled in favour of private hire taxi operators, Delta Merseyside and Veezu, over contract terms for all operators outside London, following a major lawsuit with ride sharing app Uber.

It follows news in July last year that Uber had won its court action involving Sefton Council and Merseyside taxi firm, Delta, meaning passengers could have to pay VAT on journeys.

Followng the latest ruling, Layla Barke-Jones, Dispute Resolution Partner at Chester law firm Aaron & Partners, who represented Delta Taxis, in the case, 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.

“This was a landmark case, the result of which could have had a terrible impact on the lives of so many people – not to mention the administrative burden for operators.

“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.”

She added: “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.

“Vulnerable consumers caught in the crossfire of Uber’s lawsuit rely on the services offered by taxi firms. This frequently includes the disabled, elderly and low income households. 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.

“Delta Taxis, and fellow operator Veezu, rallied against it by appealing the previous decision up to the Court of Appeal – seeking a decision on appeal that would maintain the safety that the licensing regime provides and promoting fair and open competition for private hire businesses.

“Therefore, we warmly welcome today’s announcement that the appeal has been successful, and would like to pay our gratitude to the hard work of our team including Counsels Philip Kolvin KC, and Jen Coyne.”

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. It is often the only form of transport accessible to local communities on a consistent and reliable basis.

“The original ruling had the potential to drive up fares, reduce availability of services and put driver partners and operators out of business. 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.”

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.”

The case had its origins in March 2021, when Uber was forced to raise its prices after the court ruled its drivers were now viewed as workers, rather than simply agents.

Uber railed against this in London and lost, then chose to bring a major lawsuit against Merseyside-based Sefton Council over contract terms for all taxi operators outside London. In November 2022, the High Court ruled that operators must contract with passengers. In that case, private hire operators intervened, warning of a potential consequence leading to passengers having to pay VAT on private hire journeys, leading to potential fare hikes of 20%. Despite the warning, the judge, handing down her ruling in July 2023, sided with Uber.

The Government then launched a consultation on possible options to avert the addition of VAT to all journeys. While some private hire companies, like Uber, do charge their passengers VAT, it has been down to the individual firms to decide which business model to use as to whether VAT would apply. The decision secured by Uber in the case of Uber -v- Sefton Borough Council took that choice away from the firms and from passengers.

As well as the fare increase heavily impacting the public amid the cost of living crisis, it was also set to place significant administrative burdens on taxi firms. It was anticipated that forcing operators to change their business model would force a large number of them out of business. It was feared that vulnerable groups who are regular users of private hire services, including the elderly and disabled, would be particularly affected.

Following the ruling, during his Spring Statement, the then Chancellor announced the Government would launch a consultation, the consultation continues to run until August 8, to address the issue.

Meanwhile, the judgement was also challenged at the Court of Appeal by Delta Taxis and Veezu, with a decision announced today that overturned the previous one.
It means passengers will not now face inevitable 20% fare hikes and private hire firms in England and Wales outside London will not have to grapple with how to collect the tax and account for it to HMRC if they choose to operate a model which has been used by the industry for more than 48 years.

The ruling will not affect Uber, which will continue to charge VAT on fares, but will mean many smaller firms can continue to operate as they have previously. Uber is understood to be considering an appeal.

Uber have been approached for comment.