On 8 December 2017, HMRC published a new consultation entitled “Tackling the hidden economy: public sector licensing”, which proposes a requirement for licenses to trade conditional on tax compliance.
This follows on from two other consultations, “Tackling the hidden economy: Sanctions” and “Tackling the hidden economy: Conditionality”.
The aim of the measures proposed is to prevent non-compliance (with tax obligations) by making it harder to trade unless the business complies. Six sectors have licensing schemes included in the consultation:
- Private security
- Taxi and private hire vehicles (PHV)
- Waste management
- Houses in multiple occupation (HMO) and selective licensing in the private rental sector
- Scrap metal
- Retail and trade
It would be intended that HMRC work with licensing authorities to ensure applicants are correctly registered:
- New applicants should be signposted towards tax obligations and HMRC services
- Checks should apply to those renewing licences
- The process should depend upon applicants submitting required proof of registration
- No requirement on licensing authorities to carry out more detailed tax checks
The consultation also seeks to explore the potential for these proposals to act as a first step in a longer-term roadmap for developing conditionality, such as incorporating simple tax checks into the essential services and platforms that businesses use to trade.
Replies should be sent to
Specific queries:
- Please provide comments or evidence on the suitability of the government’s proposals to apply conditionality to one or more of the licensing schemes outlined above. In your answer, please comment on:
- The extent to which checks on people’s tax-registration status would address problems highlighted in the relevant sectors, or whether additional or alternative measures of compliance should be considered.
- How effective conditionality would be in improving standards of tax compliance in the sectors concerned.
- Any positive or negative effects that conditionality would have upon the compliant majority who trade in the relevant sectors; please provide details of any additional one-off or ongoing costs that might be incurred.
- Please provide comments or evidence on the suitability of applying forms of conditionality – or similar approaches to promote tax compliance – in the construction sector?
- Are there any other sectors that the government should consider for similar applications of conditionality?
- Please describe how tax-registration or a similar standard of compliance could be introduced into existing terms and conditions of licences:
- Would it be best to introduce tax conditionality as a new, standalone condition of licences, or would it better included as a consideration with fit-and-proper person or similar checks?
- Would tax-registration be the best standard of compliance, or should a similar or broader standard of compliance be introduced – if so, what additional factors should be considered?
- Please comment on the proposed process for introducing tax checks into new licences.
- How effective would it be in promoting registration?
- How easily could the required changes be introduced into licensing processes?
- Please provide details of any additional one-off and ongoing costs that might be incurred.
- Please provide evidence on the likely effectiveness of these proposals in motivating more applicants to register with HMRC.
- Please provide further evidence on the suitability of the options described for verifying the tax-registration status of people applying for licences.
- If evidence of an applicant’s registration status is generated through personal or business tax accounts, how could applicants transfer this to a licensing authority in a secure and efficient way?
- If evidence is generated through use of documentation, how could applicants transfer this to a licensing authority in a secure and efficient way?
- Would an option be needed for those who do not engage digitally with HMRC?
- How frequently would applicants have a permissible reason for not being registered in the sectors outlined in chapter 2?
- If applicants have a permissible reason for not being registered, how should they be able to demonstrate this in order to obtain the licence?
- How can HMRC ensure that any process is simple for applicants and licensing authorities to administer?
- Should licensing authorities refuse to process licences where no evidence is provided to verify an applicant’s declaration that they are registered for tax?
- Please comment on data powers that might be needed to support the tax-registration checks described in this chapter.
- Please comment on the circumstances in which HMRC could disclose relevant information back to a licensing authority.
- What action would licensing authorities wish to take in these cases?
- Are there circumstances in which licensing authorities would wish to be informed about a licence holder engaging in tax non-compliance, beyond a failure to register for tax? Please describe what these would be.
- What one-off and ongoing costs and administrative burdens do you think will arise as a result of this proposal? Please provide evidence on the extent to which these proposals would minimise additional administrative burdens for licensing bodies?
- Are there any extra steps or safeguards that should be considered, particularly for customer groups who may find it difficult to provide proof that they are registered for tax?
- Do you agree that the proposals set out in chapter 3 strike an appropriate balance between the need to safeguard customer privacy and to address risks posed by the hidden economy? Are there any different or additional safeguards that the government should consider?
- Please provide evidence on the extent to which these proposals would minimise administrative burdens for licensing authorities. Are there any extra steps or safeguards that should be considered?
- Please describe appeal mechanisms that would, or should, apply in relation to the proposals detailed in chapter 3. Please describe any additional one-off and on-going costs or any administrative burdens associated with these proposals, and how these could be kept to a minimum.
Links:
HMRC Consultation: Tackling the hidden economy: public sector licensing
