A leading lawyer involved in the Supreme Court victory that shielded regional taxi firms from flat-rate VAT charges has warned that Chancellor Rachel Reeves’ proposed “taxi tax” could have damaging consequences for small businesses and vulnerable passengers.
Layla Barke-Jones, Dispute Resolution Partner at law firm Aaron & Partners, represented Delta Taxis in the landmark case that confirmed private hire companies outside London are not automatically required to charge VAT on all fares. The ruling gave thousands of operators long-awaited clarity – and protected passengers from drastic price increases.
But amid reports suggesting that Reeves could impose a mandatory VAT on all private rental rates in the autumn budget, Barke-Jones says the move would destroy hard-won legal certainty and disproportionately penalize those who can least afford higher costs.
“We are very concerned about rumors of a possible ‘taxi tax’ in the upcoming budget,” she said. “The Supreme Court confirmed this summer that long-standing business models of private rental companies remain lawful and that VAT is not automatically required. This result has helped protect passengers from fare increases and enabled local businesses to operate sustainably.”
Barke-Jones said introducing VAT on all fares would require a change in the law, which would override the Supreme Court’s position and place an unfair burden on small operators who are already operating on tight margins.
“Most importantly, we don’t lose sight of who this affects,” she added. “Private rental taxis are essential for older passengers, people with disabilities, low-income households and others who rely on them for their daily journeys. These are the very groups that would feel an increase in costs the most.”
The lawyer called on ministers to carry out extensive consultations – particularly with passenger groups – before making a decision that could have “far-reaching social and economic consequences”.
Her warning comes as operators across the country prepare for a Budget in which Reeves is expected to raise several small taxes to plug a multi-billion pound budget gap after ruling out increases to income tax.
