Principal or agent?

Supplies of taxi services to contract customers

The taxpayer traded as a taxi business. He engaged self-employed drivers who had their own cars kept the cash fares and paid the taxpayer rent for the use of the base. He was not VAT-registered because the total income earned from the rental payments was below the registration threshold. He also had some account clients whom he invoiced monthly based on cash dockets produced by the drivers which detailed specific journeys.

HMRC said the taxpayer was acting as a principal in relation to the account work. As a result of including the income from those customers he had traded above the VAT registration threshold since 2009. An assessment was issued as was a late registration penalty.

The taxpayer appealed claiming this turnover should be ignored from the figures because he was acting as an agent as he was...