IN A BID to tackle the hidden economy, taxi and private hire drivers will need to undergo tax checks for applications to renew their licences the Government has published.
The new rules will target individuals, partnerships (including LLPs) and companies applying for licences in England and Wales to either drive taxis or private hire vehicles (PHVs), or both, operate a PHV business or deal in scrap metal.
In todays tax note, Shipleys Tax assesses the potential wide ranging impact this will have on individuals, their businesses and families.
What is being proposed?
Licensing authorities will introduce a “tax check” on registration for renewed applications in England and Wales for licences to:
- drive taxis and private hire vehicles (PHV)(for example, minicabs)
- operate a PHV business
- carry on the business of a scrap metal dealer on a site
- carry on business as a mobile collector of scrap metal.
What does this mean?
This means an applicant who wishes to renew a licence will need to undergo a tax check before the licence is renewed. The licensing body (typically a local authority) will have to obtain confirmation from HMRC that the applicant has completed the check before being able to consider their renewed licence application. This in effect means that the licence holder will have to hope for a clean bill of health from the taxman before any licence renewal application will be considered.
Licensing bodies will be required to:
- signpost first-time applicants to HMRC guidance about their potential tax obligations
- obtain confirmation that the applicant is aware of the guidance before considering the application
- where the application is not a first-time application (a renewed application) the licensing body must obtain confirmation from HMRC that the applicant has completed a “tax check”.
Why is the government doing this?
This is a small but significant step as part of a wider programme to tackle the so called “hidden economy.” The government believes there are individuals and businesses with sources of taxable income that are entirely hidden from HMRC which is depriving the government of funding for vital public services.
They believe people operating in the hidden economy do so because they are perhaps unaware of or confused about their tax obligations. Or if they have been hiding their income for a long period, they are also likely to find it harder to come forward and tell HMRC that they are, or should have been, chargeable to tax (‘registered’).
By making access to the licences taxi/PHV drivers need conditional upon completing a tax check, the government believes the rules above will help applicants for certain public sector licences better understand their tax obligations.
Impact on individuals, households and families
At Shipleys Tax we support any well thought out measures which help people meet their tax obligations. However, the use of a blunt instrument to target what could be complicated tax affairs seems grossly unfair. Experience has shown HMRC are underfunded, understaffed and prone fatal inaccuracies resulting in the taxpayer being unduly penalised and ultimately being forced to into defending themselves, sometimes through no fault of their own.
The measures will have a material impact on employed drivers and on drivers, PHV operators and scrap metal dealers who are self-employed. All of these will need to complete a tax check when applying to renew licences. If individuals do not complete a tax check the licensing body will be unable to consider their application to renew their licence and their current licence will expire.
This could have an impact on family formation, stability or breakdown if individuals will no longer be licensed and individuals and their families would have less disposable income.
When are the measures expected to be introduced?
Budget 2020 announced that the government will legislate in Finance Bill 2020-21. The technical consultation for hidden economy conditionality will run until 15th September 2020 with changes taking effect from April 2022.
If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email email@example.com.
Please note that we do not give free advice by email or telephone.