![Popular Small-Size Actress Aunty Ajara Dies After Liver Illness [VIDEO]](https://thepunchng.com/wp-content/uploads/2026/02/20241109_125042-75x75.jpg)
London’s iconic black cab drivers have received a major boost after the UK government closed a tax loophole that allowed large app-based minicab firms to undercut traditional taxi operators.
Under the new rule, private hire vehicle operators in London can no longer use the Tour Operators Margin Scheme (TOMS) to pay significantly reduced Value Added Tax (VAT). The scheme, originally designed for holiday and travel businesses, had been used by some major online platforms to lower their VAT bills.
For years, many black cab drivers and smaller taxi firms have paid the full 20 per cent VAT, while some large app-based operators effectively paid as little as four per cent, giving them a competitive advantage.
The reform is expected to level the playing field across the taxi industry, protect drivers’ livelihoods and raise about £700 million annually, which the government says will be channelled into public services and measures to ease the cost-of-living crisis.
Government action
The decision was announced on Friday in a statement published on the UK government’s website and obtained by PUNCH Online on Saturday.
The measure, unveiled by HM Treasury, prevents private hire operators in London from applying TOMS to taxi fares. As a result, these companies will now be required to pay VAT on fares in the same way as black cab drivers and smaller operators.
According to the Treasury, the change is aimed at promoting fair competition within the industry and supporting key government priorities, including reducing NHS waiting lists, cutting public debt and easing pressure on household finances.
Chancellor’s reaction
Chancellor of the Exchequer, Rachel Reeves, described the move as a step towards fairness in the transport sector.
“We’re putting the brakes on the illegitimate use of a niche tax scheme to protect everyday cabbies. We’ll use the £700m a year this raises to deliver the country’s priorities – cutting the cost of living, cutting waiting lists and cutting debt and borrowing,” she said.
Industry welcomes move
Taxi industry representatives welcomed the announcement, describing it as long overdue.
Steve McNamara, General Secretary of the Licensed Taxi Drivers Association, said the reform addresses long-standing concerns among licensed drivers.
“The government’s decision to apply VAT to all private hire journeys is a landmark step for fairness and integrity in our industry. For too long, drivers and small operators paying the full 20 per cent VAT have had to compete with online minicab firms benefiting from a niche tax scheme,” he said.
What the scheme does
The Tour Operators Margin Scheme allows eligible businesses to pay VAT only on the profit margin of certain package trips, significantly reducing the effective tax rate. The government said a small number of large companies had been using the scheme outside its original purpose.
The Treasury clarified that black cab services and smaller operators outside London, where passengers book directly with drivers, will not be affected by the reform.
Clarification
PUNCH Online notes that the term “black cab drivers” refers to drivers of London’s traditional black taxis, also known as hackney carriages, and not to the race or ethnicity of the drivers.
