The new Tax Check policy that could affect millions of drivers in taxi and private hire vehicles in UK operating PHV business from will launch by April 2022.
This new measures come as HMRC looks to bring down on lost revenue in the hidden economy. This new policy will also affect the licensing bodies in England and Whales.
The hidden economy basically consists of individuals and businesses having source of taxable income hidden from HMRC. According to HMRC, this will deprive government fund to invest on vital public services. The tax gap due to hidden economy is estimated to be around £2.6billion for 2018 to 2019.
According to the paper released on 3rd march, the hidden economy will distort competition and further leading to health and safety violations, failure to comply with employment rights and immigration offences.
HMRC claims that it is working toward the levelling the hidden economy cluster for legitimate businesses and continuing the programme of operational work.
Post- Tax Check
Once the Tax Check is live, licensing bodies will be needing to signpost first-time applicants to HMRC guidance and obtain the confirmation that applicant will be aware of the guidance before considering the application. If the application is not a first-time application, the licensing body should consider the application, and obtain confirmation from HMRC.
The applicant will carry tax check which will include questions about whether the income from the licensed activity is declared to HMRC, where the applicant is chargeable to tax. The check will be considered as complete when HMRC is satisfied that applicant has provided complete information.
General Description of the new Tax Check:
- Drive taxis and PHVs
- Operate a PHV business
- Carry on the business of a scrap metal dealer on the site
- Taxi driver who wish to renew the license, will now have to carry out the tax check.
In the budget 2020, the government announced that it will legislate in Finance Bill 2021 to make the renewal of license to taxi drivers and operate PHVs on applicants only after completing checks confirming they are registered for the tax.