New rule hailed as huge boost for black cab drivers: ‘It is a landmark step for fairness’
Black taxi drivers are hailing a ‘landmark step’ after the government introduced higher taxes on online minicab firms.
The Tour Operators Margin Scheme, designed to significantly reduce the VAT paid by tour operators and holiday coach trips, was being abused by online minicab firms.
The Treasury said these firms were “illegally using a niche scheme to avoid tax”.
Chancellor Rachel Reeves said in a statement: “We are curbing the illegitimate use of a special tax scheme to protect casual taxi drivers.”
The scheme allows travel and holiday businesses to pay VAT only on the profits they make from package trips.
This generally reduces the applicable VAT rate to 4 percent, the government said.
Steve McNamara, general secretary of the Association of Licensed Taxi Drivers, which represents black taxi drivers, said: “For too long, drivers and small operators paying the full 20 per cent VAT have had to compete with online minicab firms benefiting from a niche tax scheme.”
He added: “The government’s decision to impose VAT on all private hire journeys is an important step towards fairness and integrity in our industry.”
Andrew Brem, Uber’s UK general manager, said the change would mean increased prices for passengers in London.
“The government’s action to change the rules today will mean higher prices for passengers and fewer jobs for drivers in London as people are already struggling with the cost of living,” he said.
“The courts have twice ruled that the Tour Operators Margin Scheme applies to operators such as Uber. This decision also reveals the absurd situation where a trip in London would be taxed at a different rate to any trip in the UK.”
The reform is expected to bring in £700 million a year and the new measure was first announced by the Chancellor in the budget.
