UK Cracks Down on “Grey” Ride Platforms – Implications for Cyprus and Beyond

UK Shuts VAT Loophole for Ride‐Hailing Apps

No More Hiding from 2026: In a landmark move, the UK government has closed a tax loophole that ride- hailing and transfer platforms had been exploiting. Starting 2 January 2026, companies arranging private hire vehicle (PHV) or taxi journeys in the UK can no longer use the Tour Operators’ Margin Scheme (TOMS) to reduce their VAT bill. This means if a platform acts as more than a neutral middleman – essentially operating as the transport provider – it must charge VAT on the full fare, not just its commission or “margin.” UK authorities have made it crystal clear that PHV and taxi rides are excluded from TOMS going forward.

For years, some “grey” ride platforms in Britain tried to classify themselves like travel agents, only paying VAT on their slice of the fare. They argued the driver provided the ride and they merely facilitated it. That era is over. HMRC (the UK tax authority) never intended TOMS – a scheme meant for tour packages and cross-border holidays – to cover domestic taxi trips. In fact, HMRC has always maintained that when a ride platform acts as principal (setting up rides and charging passengers), VAT is due on the entire trip cost. Some operators disagreed and even won initial court rounds (notably a 2023 tribunal involving Bolt, a UK-registered ride app), but the government’s new legislation “puts the matter beyond doubt”. As of 2026, any British ride-hailing business that buys in and resells rides as an undisclosed agent or principal must use normal VAT rules on those fares. In short, Uber-style platforms can no longer pretend to be mere agents in Britain – their full fares will be taxed.

Transportation Service vs. “Information Society” Service

This UK crackdown aligns with a broader legal consensus in Europe about what counts as a digital intermediary versus a transport provider. Under EU law, a platform is considered a neutral “Information Society Service” (ISS) only if it truly acts as a passive marketplace – simply connecting drivers and passengers without controlling how the service is carried out. The European Court of Justice famously ruled in 2017 that Uber is not a mere ISS but a transportation service due to the way Uber operates. The reasoning is now echoed across the industry: if a platform fixes the price of the ride and selects the driver, it’s no longer just an information service – it’s providing transport.

In practical terms, a “true” ISS platform (like a pure marketplace) would let drivers set their own fares and let riders choose their driver freely. Think of it like an online classifieds: multiple offers, driver and passenger agreeing on terms. By contrast, most ride-hailing apps set a non-negotiable fare and auto- dispatch a driver to the customer. This level of control – standardized pricing and driver assignment – “crosses the line” from intermediary to operator. EU courts have underscored that such platforms are “integrated” services – digital yes, but inextricably linked to the actual transport. As a result, they must follow transport regulations just like any taxi firm. They don’t enjoy the legal safe-harbors of a passive internet service because they orchestrate the core transaction (who drives, for how much).

In the EU, national authorities can thus require these platforms to obtain transport licenses, uphold safety standards, and crucially, comply with tax laws including VAT.

British Ride Apps Operating in Cyprus: No Free Ride

What does this mean for British companies running ride or transfer services in Cyprus? Essentially, they face the same obligations – if not more – as they do in the UK. Cyprus is an EU member state, and EU VAT law and court precedents apply. So, a company registered in Britain but offering rides within Cyprus must charge Cypriot VAT on the full price of each trip, provided it is doing business as a transport service. The physical journey happens on Cypriot soil, so the tax belongs to Cyprus (the “place of supply” is where the passenger transport occurs). Some foreign platforms have tried to avoid registering for local VAT, claiming they only owe tax on their commission. However, that claim only holds water if the platform is truly an unbiased intermediary – not setting prices, not choosing drivers. That’s rarely the case. As discussed, a platform that controls price and driver dispatch is legally the supplier of the transportation in the EU. It cannot dodge VAT by saying “oh, we’re just an app!” when in reality it’s running a transportation business.

Bottom line: A UK-based ride platform operating in Cyprus must register and remit 19% Cypriot VAT on the full fare paid by passengers, not just on its service fee. If it’s not doing so, it’s skating on thin ice. The only scenario where a platform would only tax its commission is if it stayed in the lane of an “information society service” – meaning the driver sets the fare and the platform plays no part in selecting which driver gets a booking. (In practice, hardly any major ride-hailing service operates this way in 2025.) Unless a British company in Cyprus can prove it’s purely a tech marketplace, Cyprus’ Tax Department would treat it as providing passenger transport and expect VAT on every ride.

Consequences: Taxman and Regulators Are Closing In

British “grey” platforms that flout Cypriot law are exposing themselves to significant risks. Tax evasion is a serious offence in Cyprus (as it is in the UK), and failing to charge/pay VAT on local services is textbook illegal behavior. If caught, a company can face hefty back-tax assessments, steep penalties, and interest on the unpaid VAT – potentially going back years. In extreme cases, where deliberate fraud is shown, criminal charges could be on the table. (Cyprus has pursued high-profile VAT evaders before – even multimillion-euro cases – showing that no company is too big to be held accountable.) Moreover, operating a de-facto taxi service without proper licensing is against transport regulations. Just as the UK now explicitly requires ride apps to have a PHV operator licence if they accept bookings and dispatch drivers, Cyprus too can enforce its own passenger transport licensing rules. A British company might find its app shut down or fined by Cypriot authorities if it’s essentially running an unlicensed taxi operation under the radar.

The writing is on the wall: the loopholes are closing internationally. The UK’s move to slam the door on VAT avoidance by ride-hailing firms sends a strong message. If a platform thought it could hide in a grey area – calling itself a “tech service” while pocketing tax savings – those days are numbered. Europe already set the precedent with the Uber case, and countries like the UK are now doubling down with explicit laws. From January 2026 onward, there’s nowhere left for these grey ride platforms to hide. British companies must straighten up not only at home but wherever they operate. For Cypriot consumers and legitimate local businesses, this is welcome news: it levels the playing field and ensures that everyone, locals and foreigners alike, plays by the same tax rules. And for any ride app still operating in the shadows in Cyprus – consider this a loud wake-up call. The taxman’s spotlight is turning your way, and compliance is not optional. VAT will be paid – on the whole fare – one way or another.

• VAT Tour Operators’ Margin Scheme — supplies by private hire vehicle or taxi operators – GOV.UK: https://www.gov.uk/government/publications/revenue-and-customs-brief-8-2025-vat-tour-operators-margin-scheme-supplies-by- private-hire-vehicle-or-taxi-operators/vat-tour-operators-margin-scheme-supplies-by-private-hire-vehicle-or-taxi-operators

• ISS vs. aggregator: the strategic models shaping the travel market | Cyprus Mail: https://cyprus-mail.com/2025/04/25/iss-vs-aggregator-the-strategic-models-shaping-the-travel-market

• Why Transport Intermediaries in UK & EU Can’t Legally Set Prices or Assign Drivers Intermediary or Operator? Legal Limits on Price-Setting and Driver Assignment in EU/UK Transport Platforms Travel News and Destinations: https://blog.gettransfer.com/legal/intermediary-or-operator-legal-limits-on-price-setting-and-driver-assignment-in-eu-uk- transport-platforms/