From 2 January 2026, private hire vehicle and taxi operators will be removed from the Tour Operators’ Margin Scheme (TOMS), unless their services are supplied alongside certain other travel services. The timing of this announcement is notable, as HMRC is still involved in ongoing litigation with operators including Uber and Bolt. The final outcome of those cases may influence how VAT should have been applied historically for Firms acting as Principals.

Why this matters

If HMRC ultimately loses the litigation, some operators could be entitled to reclaim VAT that has been over-declared in previous periods. HMRC has already stated that no repayments will be made until the court process is complete, but that doesn’t stop operators from preparing now.

The real issue is the four-year cap on VAT claims. Anyone waiting to claim until until the litigation concludes may lose earlier periods. For example, if a final decision does not arrive until mid-2027, a claim submitted at that point would only go back to mid-2023. A protective claim made in late 2025, however, could preserve recovery back to late 2021.

What operators should consider

Even where it’s unclear whether a business operating as Principal will fall within the scope of any successful challenge, it may still be worth reviewing the VAT position now. Protective claims are speculative, but they can help safeguard earlier years that could otherwise be lost if the courts rule in favour of operators.

Firms intending to operate as Agents for their self-employed drivers should ensure that their contracts and procedures truly reflect Agency.

How bk plus can help

If you operate in the private hire or taxi sector and want to understand how these changes may affect your business, we can help you review your current position and consider whether a protective claim is appropriate.

To discuss your options, please get in touch with the VAT team at bk plus.