TAXI TAX CHECKS: The finer details to ‘find the hidden’ taxi and PHV drivers in HMRC clamp down

With the new taxi tax check policy coming into play in April 2022, drivers and operators will have to meet HMRC requirements before being issued with a new licence to operate.

But what are the finer details of the new legislation?

Well firstly, only those who are renewing their licence will be required to complete the new tax checks, those entering as newly licensed drivers will not be required to.

So, what constitutes a ‘new’ driver? According to officials it’s anyone who has not held a licence for the last 12- months. One issue raised at an Institute of Licensing talk on the topic was whether a driver could avoid having to complete the tax checks by switching licensing authorities in an attempt to be considered a ‘new’ driver. The answer to that was a resounding no! The 12-month rule will come into play regardless of a driver being a first-time licensee with a licensing authority. If a driver has been licensed anywhere in the last 12-months, they will be considered a renewal licensee, therefore required to complete the checks.

As part of the tax checks, drivers and operators will be required to inform HMRC of how long they have been working within the taxi and/or private hire industry. Jamie Horton, HMRC Assistant Director for Policy & Strategy, said this was to help create a picture of the industry as a whole and help monitor the policy.

But this will also allow HMRC to get a clearer picture of a driver or operator’s history within the trade and whether they have been tax registered throughout that period.

Another issue raised was that any driver or operator who has not registered themselves for tax previously, would simply take a year out of the industry before returning as a new driver, therefore no longer needing to complete the tax checks and remain undetected. A driver or operator who has avoided being tax registered for, let’s say, 10 years, will probably most likely choose the option of a year out over the possibility of a back dated tax bill. This approach is certainly a cause for concern when tackling those who choose to avoid paying tax.

As stated by Mr Horton, one of the purposes of the new tax checks is to “find the hidden”. But this approach isn’t water-tight.

Now we move onto what details HMRC will require to complete the checks and what information will be given to licensing authorities.

Well, the process will be very simple and fast. Applicants will be expected to answer a few straightforward questions such as what type of licence they are applying for, how many years ago they first got a licence and the length of the licence they are applying for.

They will also be asked if in their previous tax returns, they included income earned from the type of licence they are applying for. This is where “Red Flags” could be highlighted by HMRC. If a person has held a licence for 5 years, yet there is no record of earnings submitted on a tax return, this could be a cause of concern.

For those who have been open and transparent and paid tax as they are legally required, this whole process should be easy enough to complete. On completion, the applicant will be given a Tax Check Code which will be needed by any licensing authority completing a renewal licence. Once everything matches up, and an applicant meets all the requirements of a licensing body, he/she will be issued with a renewal licence.

Licensing authorities will not have access to any applicant’s tax history, all they simply need to know is that they are tax registered. HMRC have confirmed that they will not disclose any other information to any licensing authority in relation to any driver’s application.

What about those who are applying for more than one type of licence?

For those applicants who wish to renew more than one type of licence, let’s say a driver who wishes to hold a hackney carriage licence and a private hire driver’s licence, or an operator who also wants to hold a private hire driver’s licence, they will be expected to complete a tax check for every single licence they are applying for. It’s ONE CHECK PER LICENCE TYPE.

How long will an applicant have to complete the tax checks?

A Tax Check Code, given when a check is complete will last up to 120 days, so an applicant should have sufficient time to complete the process before applying for a renewal licence.

It has been noted that if an applicant is unable to access the tax check forms online for 5 days in a row due to a fault at HMRC’s end, i.e. a system being down, then they will not be required to complete the checks and will still be granted a renewal licence. This being said, HMRC have stressed that it is extremely unlikely that they would have an issue with their systems for 5 days running, but they have put that caveat in just in case.

All in all it’s believed the introduction of this new policy should be straight-forward and simple for most, and shouldn’t be a stumbling block for those who have played by the rules. The process is to provide a “level playing field” for those working in the industry.

HMRC have said it is “NOT AN ENQUIRY PROCESS”!