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HMRC internal manual

VAT Taxable Person Manual

HM Revenue & Customs
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Particular trades: taxi and hire cars: to whom do the drivers supply their services, the cab firm or the customer?

This is the key question: if you are experiencing particular difficulty it should be your starting point as it determines who supplies the taxi transport to the customer. You must distinguish between two scenarios.

  • In the first scenario, even though the cab firm may not go to the extent of employing the cab drivers (who will be self-employed), it will nevertheless usually own the vehicles and bear expenses relating to them. Typically, there are more drivers than vehicles, and so the firm has to exercise considerable control over the drivers to ensure that it is adequately covered at all times. Here the cab firm is buying in the services of one or more drivers, and then selling the taxi transport on to the final customer as principal.
  • In the second scenario, the drivers are self-employed and will usually own their own vehicles and bear expenses relating to them. They have far greater freedom to accept or refuse work; conversely, they have to bear far greater financial risk. With enhanced freedom for the drivers goes less need for control on the part of the cab firm, which will not usually keep detailed records relating to the driver’s earnings. In this scenario the cab firm will be acting as agent for the drivers probably providing them with radio hire, booking and support services in return for a commission or fee.

You will often find that the situation is far from clear, with some pointers in favour of one scenario and others in favour of the other. To reach the correct decision, you should consult the aide-memoire at the end of this page, which lists a number of factors to consider. In addition to the aide-memoire, you may find it helpful to consult the following entries on the tribunal record, either for clarification, or to justify your decision to the trader.

  • In Hamiltax (LON/91/1420X), the tribunal held that the self-employed drivers supplied their services to the firm, who then made an onward supply to both cash and account customers.
  • In contrast, in both Triumph and Albany Car Service (LON/80/115), and Frederick George Carless (QB [1993] STC 632) the firm was found to be acting as agent for the drivers for both cash and account work, and the final supply to the customer was therefore always made by the drivers themselves.

Aide-memoire: to whom do the drivers supply their services?

The following table lists a number of factors which indicate whether the taxi drivers supply their services to the cab firm, in order that the cab firm may make an onward supply of transport to the customer, or whether the drivers supply taxi transport direct to the customer. You should reach a decision on each factor then weigh up all these decisions to find the majority view. You should always use and read this table in conjunction with the rest of VTAXPER76500.

### Factors ### Indicates a supply of taxi transport to customers by the cab firm, using the services of self-employed drivers engaged under contracts for services ### A supply of taxi transport from the drivers direct to the customer
1. Ownership of vehicles Vehicles owned by the cab firm. Vehicles owned by individual drivers.
2. Drivers’ access to vehicles (only applies if vehicles are owned by the firm) Vehicles kept on company premises; private use by drivers not allowed. Drivers hire vehicles from cab firm and can use them privately.
3. Costs and expenses Firm taxes, insures and maintains vehicles and meets fuel costs. Drivers tax, insure and maintain their own vehicles, and meet fuel costs.
4. Payment by drivers to cab firm (for support services radio hire, etc.) Drivers pay an agreed percentage of their takings back to the cab firm. Drivers pay a fixed weekly sum back to the cab firm. Anything earned in excess of that fee belongs solely to the driver.
5. Risk of bad debts Cheques from individuals made payable to the cab firm. Firm will compensate the driver if cash customer does not pay. Cheques from individuals made payable to the driver. Drivers bears risk of dishonoured cheques or cash customer not paying.
6. Advertising on cars All cars bear company logo. Cars not identifiable to the cab firm.
7. Control exercised by cab firm There are more drivers than cars. Company therefore draws up a roster and drivers have to agree to be available at set times. Cab firm enforces written negotiations relating to cleanliness of vehicle and conduct. Drivers must accept all work offered to them by the cab firm. Drivers work hours and times which suit them. Few regulations relating to cleanliness of vehicles, conduct and similar. Drivers may refuse work offered by the cab firm.
8. Record keeping Cab firm maintains detailed records of each driver and is readily able to calculate each individual’s takings. Records retained by cab firm limited to diary listing who answered what call.
9. Prices for customers Cab firm sets prices: no deviation from agreed structure allowed. Cab firm’s prices only advisory: in practice, drivers sometimes charge more or less.