New taxi VAT rule would hit vulnerable passengers hardest, warns lawyer behind landmark Uber case

A ‘taxi tax’ proposed by Chancellor Rachel Reeves could have devastating consequences for small operators and vulnerable passengers, a leading lawyer involved in a High Court win protecting regional taxi firms from sweeping VAT charges has warned.

Layla Park Jones, dispute resolution partner at law firm Aaron & Partners, represented Delta Taxi in the landmark case which confirmed that private car hire companies outside London are not automatically required to charge VAT on all fares. The ruling has provided long-awaited clarity for thousands of operators – protecting passengers from sharp price increases.

But with reports suggesting Reeves may impose mandatory VAT on all private rental rates in the Autumn Budget, Park-Jones says the move would negate hard-won legal certainty and disproportionately penalize those least able to afford higher costs.

“We are very concerned about rumblings about the possibility of a tax on taxis in the next budget,” she said. “This summer the Supreme Court confirmed that long-standing business models used by private charter operators remain legal and that VAT is not automatically required. This finding has helped protect passengers from fare increases and has allowed local businesses to operate sustainably.”

Park-Jones said imposing VAT on all fares would require a change in the law, go beyond the High Court’s position and place an unfair burden on small operators who already operate on thin profit margins.

“More importantly, we must not lose sight of who this will affect,” she added. “Hiring private taxis is essential for elderly and disabled travellers, low-income families and others who rely on them for daily travel. These are the same groups that will feel any sharp increase in cost.”

The lawyer urged ministers to consult widely – 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 financial gap after excluding income tax rises.