HMRC fights to close Bolt’s VAT loophole
Ride-hailing platform Bolt faces the tax authorities in court today over how it calculates and pays its VAT bill.
At the centre of this dispute was the question of whether Bolt could use the tour operators’ margin scheme (TOMS). Under this scheme, businesses only pay VAT on the profit margin they make between buying a service and selling it to the customer.
This means that by qualifying for this scheme, Bolt is only required to account for VAT on the commission it effectively takes from the fare, rather than the entire gross fare paid by the passenger.
However, HMRC argued in February 2023 that Bolt did not qualify for this scheme.
The tech giant appealed this decision to the First-tier Tribunal and won, leading HMRC to escalate the case to the Upper Tribunal, which also sided with the Estonian tech giant.
The Upper Tribunal agreed that Bolt’s provision of passenger transport is broadly the type of service commonly supplied by travel agents or tour operators, satisfying the scheme’s basic requirement.
The Tribunal also examined whether Bolt’s services were materially altered or constituted in‑house supplies, but it rejected HMRC’s arguments.
Despite this, HMRC has appealed the case to the Court of Appeal.
HMRC’s £1bn battle with Uber
The reason for its appeal to the second-highest court is that the authorities has a similar ongoing battle with Bolt’s competitor, Uber, over a £1bn VAT bill over TOMS.
This case is financially significant for Bolt’s legal team to defend, but for HMRC to continue to fight as it disputes with Uber is staying behind this case.
Black cab drivers already demanded that the government close this tax loophole used by Uber and Bolt. Cabbies wrote to the Chancellor last November asking her to make the tech riding apps pay the same level of VAT as black cabs.
Rachel Reeves, in her Autumn Budget, altered the scheme to exclude private hire vehicle and taxi services from the TOMS, preventing ride-sharing platforms from paying a lower tax rate, which came into effect in January.
The Bolt’s case is scheduled for Tuesday and Wednesday, with a ruling to follow at a later date.
A Bolt spokesperson said: “Bolt’s use of the tour operators’ margin scheme had been fully compliant with UK tax law, a position confirmed by both the First-tier Tribunal and the Upper Tribunal. We remain confident in our case, which has supported the thousands of drivers that earn through our platform, and the millions of passengers that have depended on affordable and accessible transport.”