Taxi operators competing with Uber are now exempt from paying 20% VAT on their earnings outside London, following a ruling from the UK Supreme Court in a long-running case.

The court determined that the private employer would not establish a contract with passengers, thereby rejecting Uber’s appeal. This decision was celebrated by the private employer as a “sector victory” after three years of legal challenges.

Uber initiated legal action after a 2021 Supreme Court ruling declared that the driver was classified as a worker.

The company sought a declaration asserting that a privately employed taxi operator had entered into a contract with passengers, a claim supported by the London High Court in 2023.

Initially, that decision required operators to pay a 20% VAT, but the Court of Appeals overturned this after Delta Taxi and Veezu challenged it last July.

Uber brought the issue to the Supreme Court, which unanimously dismissed the case involving the US company on Tuesday.

Nia Cooper, Chief Legal Officer at Veezu, remarked: “This ruling is a triumph for the UK’s private employment sector. The unanimous decision concludes a three-year legal struggle and affirms that operators can select the business models they wish to adopt.”

She added that the outcome would shield passengers from potential fare hikes and lessen the pressure on licensing authorities. “Uber aimed for a declaration that a 20% VAT would be imposed on all PHV fares,” she stated.

“This ruling also illustrates that UK-based companies can stand firm against global conglomerates that attempt to sway the sector through litigation to suit their business frameworks.”

An Uber representative replied, “The Supreme Court’s ruling confirms that different contractual protections apply to individuals booking rides in London compared to the rest of England and Wales. This ruling does not affect Uber’s VAT, which has been upheld in two previous court decisions.”

In a related matter this year, Estonian mobility and delivery startup Volt successfully contested a claim by the UK tax authorities, HMRC, regarding a 20% VAT obligation.

HMRC has since been granted permission by the Court of Appeal to appeal a ruling stating that Bolt is only accountable for VAT on the margin, not on the full fare of the trip.