HMRC is developing the system for tax checks that will apply to renewals of taxi driver and scrap metal site licences, among others, in England and Wales. The check will be integrated into the licencing application and agents will not be able to complete it on behalf of clients.
From April 2022, the renewal of certain licences in the transport and scrap metal sectors will require the applicant to complete a tax check with HMRC. When renewing their licences, applicants will need to complete a basic online check to confirm they are registered for tax if they need to be.
The requirement is known as “tax conditionality” and was subject to consultation on the policy and legislation.
The licences which will be subject to the new check are:
- taxi driver licences,
- private hire vehicle (PHV) driver licences,
- PHV operator licences,
- mobile collector licences for scrap metal dealers, and
- site licences for scrap metal dealers.
The new checks will only be included on licence renewals in England and Wales, however, the rules are expected to be expand to Scotland and Northern Ireland from April 2023.
The questions in the tax check relate to:
- An applicant’s current or past licences.
- A multiple-choice question asking whether the applicant is an employee, registered for self assessment or both. There is also an option to state that there is no requirement to notify HMRC about the income; this is intended to cover the situation where no income was earned, or it is covered by the trading allowance.
- If the taxpayer is in self assessment there is a further question which asks whether income from the licensed activity has been reported on the tax return.
If the questions are completed satisfactorily the applicant is then presented with a tax check code to be used as part of the licence application.
The check is largely designed to collect a declaration about the tax status of the individual and confirmation that income has been reported on the tax return where appropriate. It is not a compliance check and does not, for example, ask for details of the employer or confirmation of the self assessment UTR.
ICAEW’s Tax Faculty understands that HMRC can obtain sufficient assurance about the existence of a tax record from the information that is required to set up government gateway credentials to access the service.
The faculty is concerned, however, that some taxpayers may struggle to set up the credentials. An alternative telephone-based service will be provided for those in this situation.
The Tax Faculty has challenged HMRC on why agents are not being given access to complete the tax check on behalf of their clients.
HMRC has responded in Agent Update 88 stating: “Because of the simple nature of the check and its link to licensing processes, the design of the service does not include an option for agents to complete the check on a client’s behalf.
“We would expect agents to be involved in wider processes linked to the tax check. For example, this may include agents’ supporting customers who need to register for the appropriate tax.
“HMRC is continuing to design the new service and has carried out user research with agents to enable them to see the prototype in development. The idea of the service was well received by the agents who participated in the user research, and the large majority believed that their clients should be able to do the tax check on their own.”
HMRC has said that it will continue to engage with agents as it develops the service. Any questions or requests to be involved in testing can be emailed to: firstname.lastname@example.org.
ICAEW Know-How from the Tax Faculty
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