Was the business acting as agent or principal?

The taxpayer did not register for VAT because he took the view that he was acting as an ‘agent’ rather than a ‘principal’ as far as his taxi business was concerned ie the drivers provided rides to the customers and he took a 50% commission. The commission covered his overheads and profit margin and was always below the compulsory registration threshold.

In 2020 HMRC decided that he was the principal and should have registered for VAT between August 2016 and March 2019 because 100% of his turnover was relevant for registration purposes. The officer issued a best judgment assessment in January 2021 using the power given by VATA 1994 s 73(1). The taxpayer appealed.

HMRC highlighted nine factors which indicated that the taxpayer was a principal. The key ones were:

• the taxpayer booked the jobs and allocated them to drivers;
• the taxpayer fixed...