I am meeting a new client (hopefully) this afternoon who has a taxi firm. All drivers are self employed.
He tells me that taxi firms do not charge VAT. I don't currently have any other taxi firms on my books, but can't find any evidence that this is correct as HMRC is very clear that taxis are not classed as public transport.
Please can anyone shed any light on where he may have got this information from?
Replies (5)
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The usual games
Taxi Firms are indeed rarely VAT registered however this is down to either careful planning or wishful thinking.
The schemes devised rarely stand scrutiny so proceed carefully - one firm to rent the radios, the other to provide the cars etc. Much depends on the account work which is the area that it usually falls down on.
sometimes it's legitimate
The taxi firm's revenue is its commission due from the driver rather than the total fares. It is often just acting as agent for the self employed drivers.
Not where account work is involved
The taxi firm's revenue is its commission due from the driver rather than the total fares. It is often just acting as agent for the self employed drivers.
This is true only so long as the drivers are not undertaking account work of the firm.
Supply and contracts
The way that taxi firms 'avoid' VAT is to do with the arrangement between them and their drivers. This does need to be put on a proper legal basis, with well-worded contracts.
As above, account and cash work may be treated differently; drivers may be supplying their services to the taxi firm, or to the customers, or to both.
There is some guidance here: http://www.hmrc.gov.uk/manuals/vtaxpermanual/vtaxper77200.htm
In my experience some firms wish to properly document their arrangements, which protects themselves and their drivers. Others have a less careful approach. The first is more costly up-front, the second cheaper and riskier.
In my experience this type of client is a pain....
Money up front me thinks!
Vat position is normally....
Account work Vatable.
Charge to driver Vatable .
Where money is paid to taxi co on behalf of self employed driver.... Agency arrangement...
Example home location to Gatwick paid through office and reimbursed.
Obviously self employed drivers being paid by customer nothing to do with taxi co.
Like mentioned... Pain!