Agent or principal?

A VAT-registered partnership owned a fleet of cars that were hired out to individual taxi drivers.

The drivers were self-employed and not VAT-registered. They paid a weekly charge to the taxpayer based on the mileage travelled.

Some passengers paid the drivers in cash while others were account holders with the taxpayer and paid the business direct. In such cases the taxpayer accounted for the fare to the driver.

HMRC said the taxpayer acted as principal for the drivers in relation to the account-holding customers. The partnership appealed claiming it acted as agent.

The First-tier Tribunal said the question as to whether the taxpayer acted as agent for the drivers or as principal depended on the relationship between the two parties.

The taxpayer acted as the collector of the fare but did not allocate the jobs and the drivers were not obliged to respond to a...