Taxi fares outside London could rise by a fifth if Uber wins court case

Taxi firms outside London could be forced to hike their prices by a fifth if Uber wins a high court battle this week that would mean they pay VAT on journeys.

A ruling is expected to be handed down on Friday after the ride-sharing app sued Sefton council in Merseyside over VAT terms for operators outside London.

It comes after Uber revealed this week that it would hand £615m to UK tax authorities to settle an unpaid VAT claim following an investigation by HM Revenue and Customs.

Currently, private hire operators do not pay VAT as the individual drivers are usually classed as independent, self-employed contractors and do not meet the required earnings threshold. However, recent court rulings have prompted questions over that arrangement.

That made Uber the principal for tax purposes, with revenues high enough to warrant paying VAT. Other operators in the capital were also legally required to follow suit and contract directly with passengers to provide the journey and pay the tax.

The hearing began on Thursday morning and a decision is expected on Friday.