The government has published a policy paper, 'New tax checks on licence renewal applications', proposed for inclusion in Finance Act 2021. The new measure will require individuals and businesses applying to renew licences to drive taxis and private hire vehicles (PHV), operate a PHV business or deal in scrap metal in England and Wales to confirm their tax history with HMRC before their renewal application can be processed.   

  • Using 'conditionality', HMRC aims to help individuals and businesses applying for certain renewed public sector licences to better understand their tax obligations by making the consideration of their renewal application conditional upon the satisfactory completion of a tax check.
  • The purpose of the tax check is for the applicant to provide information to HMRC which confirms compliance with any applicable obligation to notify them of a chargeability to tax. If the applicant does not complete a tax check, the licensing body will not be able to consider their renewal application and the current licence will expire.
  • This reform is part of an ongoing programme to tackle the problem of individuals and businesses with sources of taxable income which have not been declared to HMRC within the hidden economy.
  • HMRC previously consulted on this matter in 2016 and estimates that the ‘tax gap’ was £2.6 billion for 2018-19.
  • The new measure is proposed to take effect from 4 April 2022.

The categories of licences that will be subject to conditionality are issued under:

  • Section 46 of the Town Police Clauses Act 1847.
  • Section 8 of the Metropolitan Public Carriage Act 1869.
  • Sections 9 and 13 of the Plymouth City Council Act 1975.
  • Sections 51 and 55 of the Local Government (Miscellaneous Provisions) Act 1976.
  • Sections 3 and 13 of the Private Hire Vehicles (London) Act 1998.
  • Section 2 of the Scrap Metal Dealers Act 2013.

HMRC is developing a simple online service for renewal applicants and licensing bodies to use.

Regarding first time applicants, there will be a requirement for licensing bodies to direct them to HMRC guidance on their tax obligations and obtain confirmation that the applicant is aware of the guidance before they consider the licence application.

The government is considering rolling out the reform to Scotland and Northern Ireland and intends to consult on extending conditionality to other sectors in due course. Based on the consultations to date, an extension of conditionality could potentially affect the business services sectors e.g. insurance, bank accounts, rental or premises, loans, accounts with suppliers or utilities.

Links

Consultations: tackling the hidden economy
HMRC have launched three consultations on ‘Tackling the hidden economy’ proposing tougher sanctions, conditionality and the extension of data-gathering powers.

New tax checks on licence renewal applications

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