5 minute read
Whatever you do, respond!
Can I please urge you not to ignore the private hire VAT consultation that is currently taking place. It is important for a number of reasons. Firstly, as an industry when do we really get asked what we want or don’t want? The consultation is about your business, a business that is an important family asset, that provides you, your staff and your drivers with a living.
What you say does matter. Future decisions won’t include the industry if it ignores something as important as the VAT treatment of everyone’s businesses and the opportunity to influence that treatment.
The consultation
The consultation is in my view a very easy document to access, read and understand. In many respects I think it is fair as it lays out a number of scenarios and options.
While it may not be strictly relevant in every detail to your particular business, that is no surprise. Indeed, that is almost the rationale for the consultation. Your expertise is needed because nobody knows your business better than you.
While it may not be strictly relevant in every detail to your particular business, that is no surprise. Indeed, that is almost the rationale for the consultation. Your expertise is needed because nobody knows your business better than you.
There is no need to answer every question in the consultation. If you don’t understand a question, or don’t feel a question is relevant to you, then leave it. This is not an exam! There are no right or wrong answers; it’s about what you think, how your business works and what you would like to happen.
Don’t get worried about the figures that are quoted. We are not here to support the inflow of tax to HMG through VAT. A great deal of VAT is “wooden dollars”. You bill your customer, they reclaim the VAT, they charge their customer plus VAT, the customer reclaims and around it goes. The net collection is not our concern and should not influence your response. No one expects any of us to be world class economists.
The extremes
Arguments and disputes normally end up being fought over the extremes of a situation. In this case should we be zero-rated or should we charge everyone who uses our service 20% extra and pass that onto HMG? Many people I speak to tell me they “don’t think we will get zero rated”, normally based on nothing very much. But if that is where you think we should be, if that is good for your business then give it some thought, give your passengers some thought and include it in your response.
Many buses enjoy zero-rated VAT plus subsidies, and yet around my way they never seem to carry any more passengers than would fit in the average PHV. If buses get these concessions for carrying fresh air around in lumbering, smoke-belching diesel vehicles why should we not get them?
Private hire is at the vanguard of clean transport – we’ve been driving hybrids for 20 years and are increasingly going electric.
Unbelievably, I understand that one of the major trade associations doesn’t see a problem with charging VAT on all fares. Well while they may not see a problem I certainly do! If there is 20% going begging, the operator would I am sure have been charging it by now. Just based on “Economics 101”, putting fares up by 20% will reduce journeys.
Over the last 2-3 years fares have, thank goodness, moved up in this industry. Fare increases were needed, after 10 years of reducing/flat fares. During 2021-22, when no one could get drivers, the increase in fares started to bring demand and supply back to a semblance of equilibrium. Even as demand reduced somewhat due to increased fares, drivers and operators had the benefit of higher fares so although demand was reduced, most companies’ turnover was at least stable.
An imposition of a 20% VAT rate on all fares, including consumers, will reduce demand and turnover as the 20% won’t be staying in the business or with the drivers – it will be going to HMG.
It wasn’t broke – so why fix it?
You may take the view, as I do, that the treatment of VAT before these two High Court Cases (London and Sefton) was pretty fair. On contract work we charged VAT; on consumer work we didn’t. Drivers’ subs, commissions attracted VAT as did car hire. Overall, I think it worked well. I can honestly say I never heard anyone complain about it.
If you feel the same then you should make that point in your response but also add why. And let’s think about why. A number of councils are concerned about transport in their areas, particularly at night, but also in areas where there are infrequent or no bus services.
The taxi/PH industry provides both a proxy for public transport and an assurance of public safety for late night revellers. We also provide many other valuable services which a 20% tax imposition would take outside of many vulnerable peoples’ budgets.
So much at stake
Folks, as an industry please respond and when you have, please tell ten of your friends to respond as there is so much at stake.
So before August 8, simply Google “VAT consultation private hire”, pour yourself a coffee, shut yourself in a room for two hours read the consultation and write what you think is good for your business, your customers and your staff and drivers.
