Is it legal to lease a private hire licence? Contract requirements

Yes, the transfer of the right to operate under a private hire licence in exchange for rent is a legal and widespread practice — it forms the basis of the mid-market investment model. However, legal does not mean informal. What is being leased is the right to operate an administrative licence that remains in the holder’s name, and this has two consequences that the contract must address in writing.

Firstly: the licence holder remains accountable to the authorities for ensuring the licence continues to meet its requirements — validation, insurance, and a vehicle registered in good standing. The second: the person operating the vehicle on a day-to-day basis is someone else. This overlap of responsibilities is precisely what a good contract sets out:

• Rent, adjustments and method of payment (direct debit and payment records: this payment history is worth money when it comes to selling the vehicle).
• Term, notice period and security deposit — two months’ rent is the market standard.
• Penalties: who is liable for fines arising from day-to-day operations and who is liable for breaches by the licence holder. Without this clause, the first serious penalty will lead to a dispute.
• Maintenance of the licence: obligation to cooperate with the licence renewal process, to keep the insurance and vehicle in good order, and to report any incidents.
• Grounds for termination — non-payment being the primary one — and what happens upon termination: refund, condition of the vehicle (if applicable), and subrogation if the licence is sold whilst the lease is in force (a licence with a solvent lessee sells better, not worse).

From a tax perspective, the lease is not ‘hidden passive income’: the rental income is subject to 21% VAT and is taxed under the lessor’s personal income tax or corporation tax — further details can be found in how the lease is taxed.

At VTC360, all rental contracts processed through the platform are legally reviewed before publication, and the operator’s creditworthiness is verified using data — fleet, length of service, metrics — within the operator network. If you’re the one renting a vehicle for work, start with the guide for rental drivers; if you’re the owner, start with what rental income you can expect.