AGENT / PRINCIPAL – A SUMMARY & WHAT IT MAY MEAN FOR YOU
After several court cases, in 2023 the taxi operator UBER won a court case against Sefton Council in England. An appeal against this ruling is to be heard in July 2024.
In summary, UBER, having been found Principal for customer bookings in London, were trying to ensure that all taxi companies are made principal for all bookings across the UK.
At present, the majority of taxi operators in Northern Ireland and across the UK act as Agent for bookings (the operator takes the booking on behalf of the driver, but the driver fulfils the journey and accepts payment from the customer directly).
Despite the fact that the UBER judgement is to be appealed, in February 2024 the Department for Infrastructure in NI (The DFI) emailed every taxi operator in NI saying they intended to update legislation here to bring NI in line with legislation across the UK. The DFI argues that these updates do not change the legislation which is already in place — they just clarify it.
In March, the Chancellor of the Exchequer announced that HMRC would conduct a consultation on these changes, specifically the issue of VAT being added to fares as a result of this judgement. Although it refers to England, VAT is a UK wide issue and responses are needed from passengers, drivers and operators here in NI.
In April, NI taxi operators from the LTOA presenting to the Committee for Infrastructure on the implications of these changes. Taxi legislation is a devolved matter, and we wished to convince our local representatives that regardless of the outcome of any appeal or consultation, should the DFI clarify taxi legislation as they intended, it would have serious implications for taxi passengers, drivers and operators.
In June 2024, the Minister for Infrastructure, John O’Dowd wrote to NI taxi operators to reassure them that he was not in favour of any changes which would harm the taxi industry in NI and that he would be responding to the VAT consultation.
While we as operators welcome the Ministers words of support, the change to Agent / Principal status has implications beyond the VAT issue and we believe that these are still underappreciated by him and his officials.
IMPLICATIONS FROM CHANGES TO LEGISLATION FOR NI
Should these updates proceed, taxi operators with fares of the VAT threshold of £90k per annum will be expected to charge, collect and remit VAT of 20% to HMRC on every journey their drivers make. This is calculated on fares, not depot rent or income and is a low threshold. We estimate that an operator with as few as two drivers with fares of £900 per week, or three drivers with £600 per week will be liable.
For a passenger:
- Fares increasing by 20% making journeys unaffordable for many
- Payment options being limited as card payments will be preferred to ensure accurate accounting for VAT
- Bookings might be restricted to app or web platforms with no telephone service, excluding the elderly, disabled and tech poor from being able to book a taxi
- Increased admin responsibilities for drivers will cause some to leave the industry prematurely
For a driver:
- Increased admin responsibilities in collecting and remitting VAT
- Increased customer complaints due to price increases
- Reduced passenger numbers and hence income because of higher prices dampening demand
- Decreased flexibility and cashflow with potential move to card only payments
For a PHVO / taxi operator:
- Increased administrative and accounting responsibility
- Expensive changes to pre-programmed meters
- Increased insurance premiums for both Operator and Driver
- Further loss of Drivers at a time when Driver numbers are already at an all-time low
- Further increase in the size of the illegal Taxi Sector in Northern Ireland putting Passenger safety at risk
CONTESTING THESE UPDATES
The LTOA has and will continue to lobby on behalf of the private hire taxi sector in NI. We would ask that you:
- Respond to the VAT consultation expressing your concerns
- Lobby the DFI, Minister and officials to protest any changes to local taxi legislation
- Talk to your local Councillors, MLAs and MPs to explain the problems these changes will bring
If you require further information about this issue, or the LTOA, please email ContactLTOA@gmail.com