Do Taxis Charge VAT?
By
HuutiMoney
If you are a taxi driver or company owner, it is important to be aware of the VAT rules that apply to your business. In this article, we will answer the question of whether or not taxis in the UK charge VAT and explore how it is applied to a tax fare; as well as discuss whether or not there are any exceptions to this rule.
Do Taxis Charge VAT?
Yes, most taxi services in the United Kingdom are subject to VAT. This means that customers will need to pay an additional 20% on top of the fare charged by the taxi driver or company. This rule applies whether you are:
- an owner-driver who either owns or rents a vehicle being used as a taxi
- the owner of a business operating a number of taxis with different drivers
- operating a taxi association
The fare that you charge either for a taxi or a private hire applies to the cost of the journey itself as well as for additional charges including baggage and waiting time.
If you are a taxi driver or company owner, you will need to register for VAT if your annual turnover exceeds the VAT threshold of £85,000 per year. If your turnover is less than this amount, you can still register voluntarily for VAT. Once you are registered, you will need to charge VAT on your taxi fares and pay this to HMRC.
In order to charge VAT, businesses must be registered with HM Revenue & Customs (HMRC). They will then be given a VAT registration number. This number must be included on all VAT invoices that are issued to customers.
What Are The Requirements For Businesses To Charge VAT?
In order to charge VAT on your taxi fares, you will need to register for VAT with HMRC. You can do this online or by post. Once you are registered, you will need to issue VAT invoices to your customers.
These invoices must include the following details:
- your VAT registration number
- the date of the invoice
- the name and address of your customer
- a description of the services provided, including the fare charged and the amount of VAT added to the total amount due, including VAT
You will also need to submit a VAT return to HMRC on a regular basis. This will show the amount of VAT you have charged on your taxi fares and the amount of VAT you have paid on your business expenses.
If the amount of VAT you have charged is more than the amount you have paid, you will need to pay the difference to HMRC. If the amount you have paid is more than the amount you have charged, you can reclaim the difference.
Are There Any Exceptions To The Rule?
Yes, there are some exceptions to the standard VAT rate for taxi services in the UK. If a taxi service is provided by a disabled person, the VAT rate is reduced to 5%. This applies if the vehicle used is specially designed to carry a wheelchair and the driver is a wheelchair user, or if the driver is providing the service to a disabled person who is a wheelchair user.
In order to qualify for this reduced rate, the disabled person must provide evidence of their disability to the taxi driver or company.
In addition to the reduced rate for disabled people, the following exceptions also apply:
- If taxi service is provided for a charity, the VAT rate is zero-rated.
- If taxi service is provided for a business outside the UK, the VAT rate is zero-rated.
Conclusion:
In conclusion, most taxi services in the United Kingdom are subject to VAT at a standard rate of 20%. However, there are some exceptions to this rule, such as the reduced rate for disabled people and the zero rate for services provided to charities or businesses outside the UK. If you are a taxi driver or company owner, it is important to be aware of the VAT rules that apply to your business and to register with HMRC if necessary.
References:
Taxis: what is liable to VAT – One Accounting
How VAT applies to taxis and private hire cars (VAT Notice 700/25) – GOV.UK