Ride-hailing firm Uber has warned it may have to start charging its UK customers Value Added Tax (VAT) following two High Court judgements about the way private hire vehicles operate.

According to the BBC, a judge has ruled that private hire taxi operators must make contracts with their customers rather than passengers only having a contract with their driver.

The ruling, which was challenged by Uber in the High Court but has been upheld, could have consequences for the wider private hire sector, as it would require some operators to pay VAT.

It follows another court ruling which said Uber must classify its drivers as workers and not independent contractors, which entitles them to benefits such as minimum wage, pensions and holiday pay.

Uber, which is a VAT-registered business, said the change in customer contracting would mean it would have to start charging passengers the 20 per cent tax on top of its fares, potentially increasing prices.

While this case referred to the Private Hire Vehicles (London) Act 1998, which only applies in the capital, Uber and the App Drivers and Couriers Union (ADCU) said the ruling could be followed by licencing authorities across the UK.

A spokesperson for Transport for London, which regulates private hire taxi firms in the capital, said: ¡°All operators will need to carefully consider the court¡¯s judgement and take steps to ensure that they comply with it, including considering whether any changes to their way of working are required.¡±

The ADCU has welcomed the ruling, saying it will put an end to private hire drivers being exposed to ¡°sweat shop working conditions¡± and passengers being put at risk.