Background
Following the legislative changes in 2026 and the Court of Appeal ruling in HMRC v Bolt Services UK Ltd, ride-hailing and private hire platforms can no longer benefit from adherence to the Tour Operators’ Margin Scheme (TOMS) for VAT purposes.
In regions outside London where private hire vehicle operators (PHVOs) genuinely operate an agency model, traditional agency rules mean the driver(principal) supplies the ride directly. If the driver’s turnover is below the UK VAT threshold, no VAT is charged on the core fare. However, drivers still incur standard 20% VAT on the booking or platform service fees charged to them by the platform operator.
In London, licensing rules don’t permit the use of the agency model for PHVOs, meaning the platform acts as a principal and VAT applies to the total the customer pays.
HMRC Consultation
HMRC opened a slot starting from October 28, 2026 to January 31, 2027, for interested parties to submit their evidence for the operationality of the TOMS.
HMRC VAT Rules on TOMS
Her Majesty’s Revenue and Customs(HMRC) is reviewing the TOMS and the VAT treatment of the travel services. HMRC launched a consultation period for reviewing evidence collected on whether the TOMS as used currently aligns with the expectations of different groups of stakeholders that are using the scheme, or are affected by it.
HMRC is also considering the VAT treatment of travel services supplied outside the TOMS, including packaged tour supplies, that are often provided by digital platform operators, both domestic and overseas.
The call for evidence is focused on a broad scope of impacted parties. HMRC is particularly interested in the documented results and observations from the travel-service suppliers, digital platform tour operators, accountants, and associations.
Impacted groups are invited to comment on possible reforms, including changes to calculations, transitional arrangements and the treatment of supplies involving businesses that are not VAT registered.
Results
The reviewed TOMS documentation could impact the shaping of the future policy and legislative proposals designed to simplify VAT administration, promote fair taxation and reduce distortions in the VAT system.