- Cabbies and small taxi companies to benefit as online minicab
firms stopped from using niche scheme to avoid paying tax
- Reform announced at Budget ensures everyday cabbies can
compete fairly
- Closure to bring in £700 million a year to help cut waiting
lists, cut debt and borrowing, and cut the cost of living
Today (Friday 2 January) online mini cab firms have been barred
from illegitimately using a niche scheme to avoid tax.
As announced at the Budget by the Chancellor, private hire
vehicle operators in London will no longer be able to use the
Tour Operators Margin Scheme - a niche tax scheme designed for
tour operators and holiday coach trips – to significantly reduce
the VAT they pay on fares.
This means that black cabs will no longer have to compete with
online mini cab firms who are misusing this scheme to pay less
VAT.
Chancellor of the Exchequer, , said:
“We're putting the brakes on the illegitimate use of a niche tax
scheme to protect everyday cabbies. We'll use the £700m a year
this raises to deliver the country's priorities - cutting the
cost of living, cutting waiting lists and cutting debt and
borrowing.”
Steve McNamara, General Secretary of the Licensed Taxi
Drivers Association, said:
“The Government's decision to apply VAT to all private hire
journeys is a landmark step for fairness and integrity in our
industry. For too long, drivers and small operators paying the
full 20% VAT have had to compete with online mini cab firms
benefiting from a niche tax scheme.
“We welcome this move and commend the Government for taking
decisive action.”
The Tour Operators Margin Scheme is a specialist VAT rule
designed for genuine travel and holiday businesses, allowing them
to pay VAT only on the profit they make on package trips, not the
full fare, typically reducing the effective VAT rate to 4%.
First announced by the Chancellor at Budget 2025, today's measure
will prevent the small number of big companies accessing the Tour
Operators Margin Scheme, as they have been doing.
By supporting fairer competition, the government is protecting
around £700 million in revenue, helping deliver the public's
priorities - cutting waiting lists, cutting debt and borrowing,
and cutting the cost of living.
Smaller operators outside London, where passengers book directly
with drivers, and all black cabs will not be affected by this
reform to the Tour Operator's Margin Scheme.
