HM Revenue and Customs (HMRC) has secured a major legal victory against ride-hailing company Bolt after the Court of Appeal ruled the firm cannot use a tax scheme that would significantly reduce its VAT bill.
The judgment, handed down on Friday, overturns two earlier tribunal decisions that had found in favour of the Estonian transport platform in a dispute worth an estimated £190million.
At the centre of the case was whether Bolt could benefit from the Tour Operators' Margin Scheme, a VAT arrangement originally designed for travel agents and holiday companies.
The scheme allows qualifying businesses to pay VAT only on their profit margin rather than on the full price paid by customers.
Bolt had argued that the arrangement should apply to its private hire operations, meaning it would only be liable for VAT on the earnings it retains from fares rather than on the total cost of journeys booked through its platform.
Under standard VAT rules, companies are generally required to account for VAT on the full amount charged to passengers.
The Court of Appeal rejected Bolt's interpretation of the legislation, ruling that its app-based taxi services do not fall within the scope of the scheme.
Lady Justice Falk delivered the judgment alongside Sir Colin Birss and Lord Justice Arnold.
The ruling marks a significant reversal for Bolt after the company had previously succeeded before both the First-tier Tribunal and the Upper Tribunal.
HMRC beats Bolt in £190million VAT dispute as Court of Appeal backs tax authority
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Bolt had maintained that the Tour Operators' Margin Scheme was intended to apply broadly to travel services and should not be restricted solely to traditional holiday businesses or travel agents.
The company argued that the legislation was designed around the concept of travel generally rather than specific types of tourism-related activities.
Judges examined whether Bolt's services could be regarded as comparable to those provided by travel agents and tour operators for the purposes of the VAT scheme.
In the judgment, Lady Justice Falk rejected that argument and concluded that the services offered by Bolt were fundamentally different.
She said: "That is, with respect, obvious."
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Uber is involved in a similar dispute with HMRC
| PALady Justice Falk added that although the concepts of travel agents and tour operators had evolved over time, there was no basis for treating app-based taxi services as equivalent.
She said: "No one can seriously suggest that travel agents and tour operators offer on demand mini-cab rides, or anything comparable to them, whether through apps or otherwise."
The court also dismissed Bolt's contention that journeys to airports and transport hubs brought its services closer to those traditionally offered by travel businesses.
Lady Justice Falk concluded that a passenger choosing an airport or railway station as a destination did not make the journey comparable to airport transfers arranged as part of wider travel packages.
The ruling is expected to have implications beyond Bolt's own tax affairs.
Uber is involved in a similar dispute with HMRC, although those proceedings were paused while the courts considered the Bolt case.
A tribunal previously noted that Uber had deposited disputed tax sums amounting to £1.446billion while the matter remained unresolved.
The outcome therefore provides a significant indication of how similar arguments may be treated in future litigation involving ride-hailing operators.
Responding to the decision, a Bolt spokesman said: "Two courts have already found in Bolt's favour on this question."
The company warned that the judgment could have wider implications for the sector.
The spokesman said: "A ruling of this scale has consequences for fares, for driver earnings and for consumer choice across the sector."
Bolt added that more than 100,000 drivers use its platform and that millions of passengers rely on its services for affordable transport.
The company confirmed it is reviewing the judgment and considering its next steps.
HMRC welcomed the ruling and said it supported the tax authority's longstanding position.
A spokesman for HMRC said: "It confirms our position on the VAT treatment of private hire vehicle operator services of passenger transport."
The judgment represents one of the most significant VAT rulings affecting the ride-hailing industry in recent years and could have major financial implications for operators facing similar tax disputes.