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bigduckontax
bigduckontax, Accountant
Category: Tax
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I own a private hire taxi company and I need to know if I am

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I own a private hire taxi company and I need to know if I am charging my drivers to much Vat.
My drivers are self employed and they obtain their work from ourselves for which we charge 20% of the total fare.
The drivers get 2 types of customers.
Customers that pay cash at the end of the journey and Customers (or their company) who have an account.
At the end of each week we add the total amount of fares earned, both account and Cash together and invoice our drivers at 20% of their total earning. We then add a further 20% Vat to arrive at their total payment.
At the end of each month we invoice our account customers and obviously add 20% Vat,
We have recently engaged some new drivers who come from one of our competitors and they claim that our competitor does not charge them Vat on the account portion of their income as this has already been paid by the customer and by charging them Vat on their account fares I am charging Vat twice on 20% of the account work.
Who is correct please
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. As I am sure you are aware taxi services are standard rated, unusual for travel, but not to worry. To strip out the VAT and account for it for fares received is the perfectly proper treatment. However, I feel your method of remunerating your drivers may not be quite right. Unless they are themselves registered for VAT, and the turnover threshold is 82K, to deduct 20% is incorrect. If they are so registered they should issue you with an invoice monthly which you can use to support your reclaim of the input tax, but if individual drivers are not registered then the deduction is inappropriate. I understand what you are doing, but I have been involved in VAT since its inception in the early 70s, and I do not think your are absolutely correct in your approach. I appreciate that for individual drivers, where registered for VAT, the issue of monthly invoices may be a bit of a palaver, but you could find yourself in some difficulties were your business subject to a VAT inspection with no vouchers to support your inputs. I recall on one occasion a VAT Inspector demanding to see the voucher for 13p, yes thirteen new pence, of input tax reclaimed. She seemed quite disappointed when I produced it! It all comes down to the individual driver and whether of not they themselves are registered for VAT. At one time I had a client who was a taxi driver. He collected fares and noted them in an little book which he used to support his payment to his taxi firm after deducting the percentage that was his slice, but his turnover was far below the threshold so it merely remained for the taxi firm to slice out HMRC's share of the tax from his records of gross cash fares collected. I do hope that I have shed some light on your conundrum.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3613
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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