The Government is extending 'tax conditionality' to animal welfare, transport and waste sectors in the UK and this will likely roll out to further sectors too. A new consultation was published in Autumn Budget 2024 ‘Tackling the hidden economy: expanding tax conditionality to new sectors’. It considers, amongst other factors, whether HMRC can share data with other regulators.
In a bid to reduce non-compliant licence holders, HMRC are looking to extend current tax ‘checks’ on applications for licences and renewal of current licences. HMRC is currently focusing on sector areas that include but are not restricted to waste carriers, brokers and dealers, dog breeders, animal boarding and pet sellers as well as specific licences for vehicles in the taxi and private hire sector.
Tax conditionality operates by:
- Obtaining confirmation that applicants applying for a new licence are aware of their tax obligations.
- Carrying out a tax check on any applicant who wishes to renew a licence.
- Checking that the applicant is appropriately registered for tax.
- Facilitating the checks through an HRMC digital service. (A helpline is available for anyone unable to use digital services).
HMRC believe extending the conditionality checks across the waste, animal welfare and transport sectors will assist in closing the tax gap and increase standards for those who currently comply with HMRC regulations.
First-time applicants
First-time applicants, having not yet commenced trade, are not required to complete a 'check'. Instead, they will be required to provide confirmation to their licencing body that they are aware of HMRC’s guidance on obligations to notify.
Renewal of Licence
When applying for a renewal of a licence, the applicant will be required to provide specific details about themselves and their licence to HMRC who will clarify their identity and confirm if they have met their tax registration and reporting obligations.
The applicant must log in to HMRC’s digital service and provide the information requested which will then generate a code that can be given to the licence provider to confirm the check has been completed.
Licensing providers will be required to:
- Obtain confirmation from the applicant that they are aware of their tax reporting and registration obligations, this may be by way of a declaration.
- For renewals, the licence provider must obtain confirmation from HMRC that the applicant has already completed a tax check, this will be done by using HMRC digital services.
The consultation is aimed at those with knowledge of the relevant sectors and gives an opportunity to provide an opinion on introducing the conditionality checks to these specific sector areas.
Further changes
The Government is also looking for feedback on introducing a tax check for first-time applicants where appropriate. This will be for specific licences where there has already been an active trade but the applicant is commencing a new activity which falls under one of the relevant sectors.
Changes are also being considered in the way the digital service is administered with the possibility of an automated service allowing licensing bodies to incorporate verification into their own software to produce confirmation of the check in real-time.
Consultation
The consultation closes on 31 January 2025. Responses can be submitted online, by email or via post.
Useful guides on this topic
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.
Consultation Responses: Tackling the Hidden Economy
HMRC have published responses to their consultations ‘Tackling the hidden economy: Sanctions’ and ‘Tackling the hidden economy: Conditionality.
Tax Compliance: Autumn Budget 2024
New proposals in terms of tax compliance, penalties and HMRC's other powers made during Autumn Budget 2024 include the mandatory registration of tax advisers who interact with HMRC from April 2026 and an increase in the late payment interest rate.
External Link
Consultation: Tackling the Hidden Economy - Expanding Tax Conditionality to New Sectors
Consultation Questions
Question 1: Should the government require first-time applicants to complete a tax check when applying for specific licences where it is appropriate do to so? If so, which licences, permits, approvals or registrations in the sectors discussed in this consultation should it apply this to?
Question 2: Would licensing bodies who process taxi and scrap metal licences currently in scope of tax conditionality adopt this process if it was offered? If so, would it reduce your administrative overhead and by how much?
Question 3: Do you have any comments about, or evidence of, the suitability of expanding the use of tax conditionality to waste regulatory regimes?
Question 4: Are there any features of the waste regulatory regimes or processes used by the bodies administering them, which are incompatible with tax conditionality, or the policy model outlined in Chapter 2?
Question 5: Where appropriate renewal mechanisms don’t exist, should regulators direct those registering to information about their tax obligations?
Question 6: Do you have any comments about, or evidence of, the suitability of expanding the use of tax conditionality to animal welfare licensing? If so, which activities should conditionality apply to?
Question 7: Are there any features of the animal welfare licensing or processes used by licensing providers in administering them, which are incompatible with tax conditionality, or the policy model outlined in Chapter 2?
Question 8: Do you have any comments about, or evidence of, the suitability, positive or negative of expanding the use of tax conditionality to vehicles in the taxi and private hire sector in the UK?
Question 9: Are there any features of the licensing regimes which apply to vehicle proprietors used in the taxi sector or processes used by independent licensing authorities/bodies in administering them, which are incompatible with tax conditionality, or the policy model outlined in
Question 10: Do you have any comments about the proportionality of extending tax conditionality to licences for vehicles in the taxi and private hire sector in addition to the existing licences already in scope of tax conditionality?
Question 11: Should the government seek to apply tax conditionality to pedicabs in London if a licensing scheme is introduced to regulate the activity?
Question 12: Do you have any comments or evidence on levels of hidden economy activity within those who drive pedicabs or operate pedicab businesses in London?
Question 13: Do you have any comments on the suitability of safeguards outlined in Chapter 2 and are there any further safeguards needed in addition to those outlined in Chapter 2 for the licences outlined in Chapter 3?
Question 14: Do you have any comments about, or evidence of, any impacts (positive or negative) of applying tax conditionality to the regulatory regimes set out in this consultation?
Question 15: Are there any licence holders who may need additional support to engage with the tax check and what support do they need?
Question 16: What other sectors should the government seek to apply tax conditionality?
Question 17: Should the government seek to apply tax conditionality requirements to new licensing schemes or existing licensing schemes from the outset?
Question 18: Should regulators be required to consider if tax compliance should form part of any new, or changes to existing standards and or administrative processes for business operations?
Question 19: Should HMRC be more easily able to share information (e.g. to confirm whether a person is appropriately register for and paying tax) with regulators to help ensure they are an appropriate person to be undertaking the regulated or licenced activity?
