The End of The Hidden Economy? HMRC To Enforce Tax Checks on New and Renewed Licenses.
Well, they threatened, and then they consulted, and then this:
The consultation discussed the principle of conditionality, which would involve making access to licences or services needed to trade conditional upon tax registration. It explored how conditionality could reduce activity in the hidden economy. It did not present firm policy proposals but sought views on the underlying principles of conditionality, the best approach to delivering this, and the services and sectors in which it could be an effective compliance tool.
The majority of responses agreed that HMRC should be focusing on new approaches to tackling the hidden economy and recognised that conditionality could be an effective way to support compliance. Equally, most responses were clear that any approach to conditionality must minimise burdens upon compliant businesses and providers of licences and business services.
And here it is………………
In England and Wales, Tax checks will be conducted on any new applications for any and all licenced businesses. If there is a time to take the tax of your sub contractors seriously, it is now.
HMRC will introduce checks on tax registrations for all renewed applications in England and Wales. This includes applications to drive taxis, vehicles, and applications to operate a private-hire business, as well as any other licenced business such as scrap metal, and even money service businesses. This is being called ‘conditionality’, as entry to the nowadays to so many trades (through licensing) is now conditional on tax checks.
Licensing bodies and local authorities will need confirmation from HMRC that applicants have passed the check before being given a renewed license.
HMRC is doing this as a response to the hidden economy, which they believe exists as a result of a ‘confusion’ and a lack of understanding about tax obligations. Making access to licenses conditional on a tax check certainly makes it more difficult for people to enter or remain as part of the hidden economy. It also creates a more transparent industry.
HMRC has conducted two consultations on using conditionality to tackle the hidden economy. According to them, the focus is on minimising the risks posed by the hidden economy while also preventing the creation of administrative burdens for licensing authorities and professionals looking to continue working as normal.
In the 2020 budget, it was announced that the government will include legislation in the 2020-2021 finance bill. They declared that they will make the renewal of licenses to drive taxis and private hire vehicles and deal in scrap metal conditional on tax checks.
According to HMRC, licensing bodies will signpost first-time applicants to HMRC guidance about tax obligations. This is to obtain confirmation that they are aware of what is expected of them before considering the application.
The tax check will be carried out by providing enough information for HMRC to be satisfied that the applicant is aware of their tax obligations and willing to adhere to them. If the licensing body is unable to obtain confirmation of tax check completion for 28 days, licenses will either be denied or will be allowed to expire.
Some say that this HMRC scheme could earn them an extra £65milion each year in the taxi and PH industry alone by 2026.
The hot water that licensed companies or companies that use licensed sub-contractors will find themselves in should be taken seriously. Making sure that your company and your sub-contractors are compliant with HMRC’s tax checks, and that they have valid licenses, should be part of your onboarding and operations processes. Sometimes you will read my blogs about grey areas in regulation and legislation however this is pretty straightforward. Stay compliant and in line with HMRC’s demands, in order to keep your business and legislation out of your nightmares.
If you need help with any of the subjects mentioned in this Eazitax has the answer.
Contact Gary or Nosa on 020 8529 2600
