Merseyside taxi fares could increase by 20% after Uber wins case against council

The cost of taxi journeys in Merseyside and across the country could rise by 20% after landmark case involving Uber and a group of the region’s private hire firms.

A solicitor representing the group of Merseyside taxi firms warned that vulnerable people may now have to pay more after app-based company Uber won a test case against Sefton Council.

Layla Bark-Jones of law firm, Aaron & Partners, which represents Sefton-based Delta taxis and other Merseyside companies said the judgement issued by the high court last week could leave passengers hit with a potential 20%  fare increase.

The case: The court case centred around who holds the contract for services with customers when taking out a taxi. It followed an earlier supreme court case where Uber drivers were judged as “workers” and which led to a further high court case which judged Uber to hold a direct contract with passengers rather than acting merely as an agent or intermediate.

The judgement had implications for the way private hire operators carried out business operations in London.  Uber stated it had taken the case against Sefton Council in a bid to have the situation regularised throughout the rest of the UK.

Although Sefton Council was the defendant in the court case, it stated it had taken a “neutral stance” and was merely helping the court with factual and legal information.

Implications: Ms Bark-Jones said that the judgement has implications for the way VAT is treated for taxi operators, claiming that as a result customers are likely to have a 20% VAT charge passed on in their fares.

She said this would affect “vulnerable passengers” already hit by inflation and the cost of living crisis and could also lead to costs for home to school transport funded by local authorities to rise significantly.

She said her firm is considering appealing the verdict but also called on the governmetn to “resolve” the situation by making setting the VAT requirement at zero for taxi journeys.

Mr Bark-Jones said: “We are obviously disappointed with the outcome and concerned about the potential impact.  It’s not automatic but has the potential to now lead HMRC to charging 20% VAT on every passenger journey.”

“Our stance on that was really on the side of passengers to protect the most vulnerable.

“We are considering the position and potential for appeal but we’re also calling on the government to zero rate the fares for private here so these with no access to alternative servcies on the buses and trains still have an affordable means of travel.”

Ms Bark-Jones added that the implications are for firms such as Delta having to pass on VAT costs to passengers.  She said: “People don’t always realise this, but VAT is something that would be collected on behalf of the government and then passed on. It’s not a tax on Delta it’s a tax on customers.”

Uber response: Uber said the judgement brought about regulatory consistency and would not automatically lead to an increased cost of fares for passengers.

A spokesperson for Uber said: ““The judgment resolves a major inconsistency in the way that rules have been applied for private hire operators across England and Wales. But whilst it clarifies many key points, there remain questions on VAT and what passengers should pay.”

Uber said it believes taxi operators would not have to charge 20% on the whole taxi fare but just on the margin, claiming this is in accordance with current HMRC rules.

Government response: The Treasury was contacted for comment on the points raised by Ms Bark-Jones and Uber.

A spokesperson said the government had no plans to change the tax situation with regards to taxi fares and added that it did not agree with Uber’s claims that 20% VAT should only be collected on the “margin” rather than the whole fare.

The spokesperson said: “This High Court ruling is not a tax case and does not have a direct bearing on the tax position.

“Whilst we keep all taxes under constant review, there are no current plans to change the tax status of private hire journeys.”