New Tax rules affecting Taxi and Private Hire Driver Licence applications

The Government has recently announced new proposals to require all persons applying for the renewal of certain types of licences to prove that they have completed a prior tax check with HMRC. The indication is that these new rules will come into force from April 2022.

This new approach from HMRC of making such renewal decisions conditional on the tax check is referred to as ‘tax conditionality’.

The process will vary slightly depending on whether someone is renewing their licence or applying for the first time.

If renewing a licence, a tax check reference number will be required which can be obtained by submitting the individual’s details into the online service. The licensing body will use this information to confirm with HMRC that the applicant has completed a tax check and then reach a decision on the licence in the usual way.

First-time applicants will not have to complete the check. Instead, licensing authorities will ensure that those applicants have access to HMRC guidance, which will provide details of what they need to do in order to be properly registered for tax in the future.

The proposed changes will affect the following licences:

• taxi driver licences 
• private hire vehicle (PHV) driver licences 
• PHV operator licences 
• mobile collector licences for scrap metal dealers 
• site licences for scrap metal dealers 

HMRC believe that this approach to applications will encourage compliance and help create a level playing field for businesses in these sectors. 

Impact on Agents and Accountants

HMRC have stressed that the tax check is not an enquiry or a compliance check into an individual’s affairs. It is being described as part of the requirement that applicants will need to fulfil in order to get their licence.

The suggestion is that the check is in place to ensure that those receiving a licence have complied with basic tax obligations, and it will simply become another check linked to the licensing process, similar to those fulfilled by applicants in relation to their driving licence status or right to work.

It is anticipated that the questions in the tax check will relate to an applicant’s current or past licences. There will be a number of multiple-choice questions to determine if applicants have notified chargeability to income tax or corporation tax, and if income from the licensed activity has been reported on a tax return.

Agents will not be able to complete the check on a client’s behalf, although they should be involved in wider processes linked to the tax check. Undoubtedly, HMRC will be hoping that agents will support the licence applicant to register for the appropriate tax where needed.

Whilst the design of the service is not yet finalised, HMRC have continued to conduct user research with agents to enable them to see the prototype in development. According to HMRC, the idea of the service has been well received by those agents who participated in the user research, and the indication is that the majority of agents believe that their clients should be able to complete the tax check without the need to seek help from their agent or accountant.

Guild Freelancing supports businesses which engage the services of self-employed individuals and helps them to engage workers compliantly and free from concerns over employment status and intermediaries’ legislation enquiries from HMRC.

To find out more about what we do, visit our website.