Argyle Park Taxis Ltd v Revenue and Customs

A flat-rate deduction from payments owed by a principal to self-employed drivers is not ordinarily a separate taxable supply by the principal to the drivers. A separate supply requires cogent evidence of what was supplied and the consideration attributable to it. The court must analyse the substance of the particular arrangement, distinguishing deductions connected with the drivers’ own business from reductions in payment for services supplied to the principal. Different contractual arrangements may produce similar economic effects but different tax consequences.

Argyle Park Taxis Ltd appealed on a point of law against a VAT Tribunal decision dismissing its appeal against an assessment of approximately £153,000. The company operated both casual and contract taxi businesses. It was accepted that, for casual work, the drivers were principals and the company acted as their agent, with VAT due on the weekly payment made for access to that business.

The dispute concerned a £72 weekly deduction from sums otherwise payable to drivers performing contract work. The Tribunal held that the company acted as principal towards contract customers but nevertheless treated the deduction as consideration for a separate supply to the drivers. The central issue was whether that conclusion was legally sustainable on the facts found.

1. Appeal allowed. The Tribunal’s decision was unsatisfactory and its reasoning did not clearly distinguish the legal relationships, payment mechanisms or findings of fact concerning casual and contract work.
2. The company was principal in supplying taxi services to contract customers. The drivers supplied driving services to the company, which paid them for those services and bore the risk of non-payment by contract customers.
3. The £72 deduction related exclusively to contract work. It was a reduction in the amount otherwise payable by the company to the drivers, rather than a payment for access to the drivers’ own casual business. The Tribunal had confused that deduction with the separate casual-work payment.
4. The Tribunal relied heavily on Camberwell Cars Limited, but misunderstood its facts. The part of that decision concerning drivers paying for access to cash business was materially different. The closer comparison was the treatment of two van drivers, where a flat-rate deduction could equally have been made by reducing the drivers’ remuneration.
5. Where a driver performs contract work only and is paid by the company for services supplied to it, a reduction in that payment cannot ordinarily be characterised as a separate supply without very cogent evidence. Equipment hire might constitute a separate supply, but no such finding had been made. To the extent the deduction represented the company’s own business overheads, no supply to the drivers was identified.
6. The commissioners were ordered to pay the company’s costs of the appeal and of the Tribunal proceedings.

1. High Court (Chancery Division): allowed the appeal from the VAT Tribunal.
2. VAT Tribunal, Manchester Tribunal Centre: dismissed the company’s appeal against the VAT assessment on 12 September 2007.