Black cab drivers are hailing a ‘landmark step’ after the government enforced 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 misused by online minicab firms.
The Treasury said these firms were “illegitimately using a niche scheme to avoid tax”.
Chancellor Rachel Reeves said in a statement: “We’re putting the brakes on the illegitimate use of a niche tax scheme to protect everyday cabbies.”
The scheme permits travel and holiday businesses to only pay VAT on the profit they make on package trips.
The government said this typically reduces the effective VAT rate to 4 per cent.
Steve McNamara, the general secretary of the Licensed Taxi Drivers Association, which represents black cab drivers, said: “For too long, drivers and small operators paying the full 20 per cent VAT have had to compete with online mini cab firms benefiting from a niche tax scheme.”
He added: “The government’s decision to apply VAT to all private hire journeys is a landmark step for fairness and integrity in our industry.”
Andrew Brem, Uber’s general manager for the UK, said the change will mean prices rise for passengers in London.
“The government’s action today to change the rules will mean higher prices for passengers in London, and less work for drivers, when people are already struggling with the cost of living,” he said.
“The courts have twice ruled that the Tour Operators’ Margin Scheme applied to operators like Uber. This decision also establishes the absurd situation where a trip in London will be taxed at a different rate than a trip anywhere else in the UK.”
The reform is expected to bring in an £700 million a year and the new measure was first announced by the Chancellor in the budget.
