When doing business in London, taking a journey in a black cab is not unusual, but this also means the question of VAT on London black cabs and fares is a common one. This can include whether you can claim VAT back on black cab charges. This guide will explain the specific regulations regarding VAT (Value Added Tax) on black cabs, including the applicable rates, and the possibility of VAT reclaims.
So, if you have been left confused as a business owner on whether ‘is there VAT on London black cabs?’ here’s the simple answer:
Black cabs, also known as Hackney carriages, are subject to the same VAT regulations as other taxi services in the UK. The standard rate of 20% VAT is applied to black cab fares, and the drivers or taxi companies are responsible for VAT compliance.
So, the short answer is yes there is VAT on black cab taxi fares in the UK, but as with anything to do with the UK tax system it is a bit more complicated than that.
This can be a complex area if you operate as a driver of a taxi or private hire car so make sure you read the HMRC full guidance on how vat applies to taxis and private hire cars (VAT Notice 700/25).
We have covered various scenarios below to help you understand when there is VAT on taxi fares.
What is the VAT rate for black cabs in the UK?
The VAT rate for black cab rides the UK is generally set at the standard rate of 20%. This means that 20% VAT is added to the total fare charged by the black cab service provider.
There are specific rules that apply to black cab and private hire cars. Private hire cars from a VAT perspective are often referred to as mini cabs.
The fares charged to passengers for black cab or private hire journeys are liable to VAT at the standard rate. Tips voluntarily given are not regarded as payment for a supply and are outside the scope of VAT i.e., you cannot reclaim VAT on a tip paid to the driver.
Whilst this may seem straight forward it does get a bit more complicated depending on whether the taxi driver is self-employed, employed through the taxi firm or use the agency services of a taxi business.
Can you claim VAT on black cab fares?
In most cases, individuals and businesses cannot claim VAT on black cab fares for personal use. However, if the black cab service is used for business purposes, such as traveling to a business meeting or transporting clients, the VAT incurred on those fares may be recoverable as input tax, subject to the normal VAT recovery rules.
The way in which the taxi driver operates could determine whether VAT is charged or not. As such always get a receipt and look out for the VAT amount or VAT number as an indicator of whether you can reclaim the VAT or not.
HMRC VAT on black cab fares
The HM Revenue and Customs (HMRC) regulations stipulate that taxi fares are generally subject to VAT at the standard rate of 20%. Taxi service providers are required to account for and remit the VAT collected to HMRC if the driver is registered for VAT.
If the driver is not registered for VAT, then VAT is not applicable, and you cannot reclaim VAT.
Are black cab VAT exempt or zero-rated?
Black cab fares in London are not exempt or zero-rated but are subject to the standard rate of 20%. However, certain specific transportation services, such as transportation for disabled individuals, may qualify for zero-rating under certain conditions. It is advisable to consult with HMRC or a tax professional for specific circumstances.
Whilst the standard rate of VAT is currently 20% it does not mean that all fares will be inclusive of VAT as the driver may be self-employed and not VAT registered so it is important to get a copy of a valid receipt to ensure you are compliant in reclaiming the correct amount of VAT.
Conclusion
In London, black cab fares are generally subject to VAT at the standard rate of 20%. While individuals and businesses typically cannot reclaim VAT on taxi fares for personal use, there may be opportunities to claim VAT on fares incurred for business purposes, subject to the relevant VAT recovery rules.
It is important to understand the VAT implications of different taxi services, such as Uber or black cabs, and consult with HMRC or a tax professional for specific circumstances.
Being aware of the VAT regulations surrounding taxi fares ensures compliance and accurate accounting for both taxi service providers and passengers.
Jon has been in business since 1999, and in that time worked with more than 300 small business clients. As well as being an accountant, he is also an early adopter of tech, and has helped small businesses to leverage the power of their computer systems by creating software to automate and simplify accounting tasks.
