Taxi for hire

Treatment of cars provided to taxi drivers

The taxpayer was a mini cab car hire and courier business. For the past five years it had kept a fleet of spare cars that the drivers who were self-employed could use when their own were off the road. The drivers paid the taxpayer £125 a week for the rent of a taxi radio and it was asserted by HMRC for the use of the loaned vehicle. The drivers could buy the cars once they ‘ceased to have any economic value’ to the taxpayer.

In its tax return for 2011-12 the taxpayer included the cost of the cars as a revenue expense. HMRC said it was a capital expense. The cars were plant and machinery and should have been treated in the accounts as capital items.

The taxpayer appealed saying the cars were short-life assets.