Major VAT overhaul for private hire vehicles starts January 2026
A significant change to VAT rules for private hire vehicle (PHV) operators will take effect from 2 January 2026. The update means VAT will now apply to the full fare charged to passengers, rather than just the operator’s gross margin. This shift follows legal developments and aims to align tax rules with recent court decisions.
The adjustment stems from the 2021 Supreme Court ruling in Uber BV and others v Aslam and others, which reshaped how PHV operators are classified. Under the new rules, businesses acting as principals—not those using an agency model—will face VAT on the entire fare. The Tour Operators Margin Scheme (TOMS) is also being revised to reflect this change.
From January 2026, PHV operators acting as principals must account for VAT on the full passenger fare. The move brings tax rules in line with legal precedents and may set the stage for further adjustments. Operators using an agency model will remain unaffected by this specific change.
