Taxi firms outside London could be forced to hike their prices by a fifth if Uber wins a high court battle this week that would mean they pay VAT on journeys.

A ruling is expected to be handed down on Friday after the ride-sharing app sued Sefton council in Merseyside over VAT terms for operators outside London.

It comes after Uber revealed this week that it would hand £615m to UK tax authorities to settle an unpaid VAT claim following an investigation by HM Revenue and Customs.

Currently, private hire operators do not pay VAT as the individual drivers are usually classed as independent, self-employed contractors and do not meet the required earnings threshold. However, recent court rulings have prompted questions over that arrangement.

Uber was forced to raise its prices in March after the 20% tax was applied to rides booked through the app. The switch came about in response to a high court ruling last December that confirmed its drivers were classed as “workers” controlled by Uber rather than independent contractors and therefore the app was directly taking the bookings.

That made Uber the principal for tax purposes, with revenues high enough to warrant paying VAT. Other operators in the capital were also legally required to follow suit and contract directly with passengers to provide the journey and pay the tax.

The original ruling applied to Uber’s London business, but a spokesperson for the company told the Guardian it had applied the changes across the UK and it “considers that the PHV [private hire vehicle] regulation in the rest of England, Wales and Northern Ireland is substantially the same as London”.

The company is asking the high court to declare any licensed operator accepting a booking anywhere in the UK to also be classed as the principal contractor and therefore liable for VAT – potentially leading to a price rise in minicab fares across the country.

The hearing began on Thursday morning and a decision is expected on Friday.

Layla Barke-Jones, a partner in the dispute resolution team at the law firm Aaron & Partners, is acting on behalf of a group of Merseyside taxi firms, including the Sefton-based Delta Taxis, to counter Uber’s court move.

She said: “This case is a very important one that could have repercussions for the entire private hire industry in England and Wales, and in particular on passengers during this cost of living crisis.

“Due to the wider significance of the case, we have successfully applied on behalf of our clients to be interveners and look forward to representing their collective views in the high court.

“It is our intention to argue against the declaration sought by Uber from being made and we hope to protect the traditional models of the private hire industry that have existed before and after the 1976 [Local Government (Miscellaneous Provisions)] Act came into force and differ significantly from what app-based services, like Uber, offer.

“On behalf of our clients, we are seeking to prevent the unnecessary changes that will ultimately impact everyday people if the declaration were made.”



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