From 2 January 2026, suppliers of most standalone private hire and taxi journeys can no longer use the tour operators’ margin scheme (TOMS)
Previously, some private hire operators, including certain app-based platforms acting as principal in supplying the journey, applied the TOMS to account for VAT only on the difference between what the passenger paid and what was paid to the driver. Under the new rules, that treatment is no longer available for standard taxi or private hire journeys supplied on their own.
Where the operator is acting as principal in making the supply to the passenger, it must account for VAT at 20% on the full fare charged to the customer, rather than just on its margin.
There is, however, an important exception. If a taxi or private hire journey is supplied as part of a wider eligible travel package, for example if it is bundled with accommodation or flights, and is ancillary to the main travel service, the TOMS may still apply to the overall package.
If you operate a private hire or taxi business and act as principal in supplying journeys to passengers you might need to move to standard VAT accounting and charge VAT at 20% on the full fare. This may require system and invoicing changes and careful consideration of pricing, cashflow and profitability. We recommend reviewing your contractual position and VAT treatment as soon as possible. We can assist with that review.
