The government said the move will put an end to some private hire vehicle operators (PHVOs) trying to exploit an administrative scheme intended for tour operators to lower their effective VAT rate.

From 2 January 2026, all PHVOs in London, and all PHVOs who operate as ‘principal’ nationally, will pay VAT in the same way and will no longer be eligible to use TOMS.

The move comes after years of protracted court battles with the giant US ride hailing apps like Bolt and Uber.

HMRC often comes out of court saying ‘we lost this battle, but we are in charge of legislation, so we will win the war’.  That is a lesson Uber and Bolt are about to learn.  

Bolt is currently litigating whether it (and other ride hailing apps) can use the tour operators margin scheme (TOMS) for VAT payments, ie, whether they can account for VAT on the difference between what they pay the drivers and what they charge the customer. There were billions of disputed VAT at stake in the various outstanding cases if HMRC had lost.