New tax checks on licence renewal applications.

Tax checks are to be introduce for renewed applications in England and Wales for licences to:

• carry on the business of a scrap metal dealer on a site

• carry on business as a mobile collector of scrap metal

• drive taxis and PHVs (for example, minicabs)

• operate a PHV business

This will address part of the hidden economy. The hidden economy is sources of taxable income that have not been declared to HMRC. . The hidden economy tax gap (the difference between the amount of tax that should, in theory, be collected by HMRC, and what is actually collected) is estimated to be £2.6 billion for 2018 to 2019. 

This measure will have an effect on applications made from 4 April 2022. 

Individuals, partnerships (including limited liability partnerships (LLPs) and companies applying for licences in England and Wales to deal in scrap metal or operate a taxi business. The measure also affects licensing bodies in England and Wales that administer those licence applications. The government is considering extending this reform to Scotland and Northern Ireland in the future and will work with the devolved administrations to this effect.

An applicant who wishes to renew a licence will need to carry out a tax check. The licensing body (typically a local authority) will have to obtain confirmation from HMRC that the applicant has completed the check before being able to consider their renewed licence application. The measure will have a significant impact cumulatively on around 400,000 businesses who are expected to hold licences in the relevant sectors by 2022 to 2023. Each time they apply to renew their licences businesses will need to use the new digital service or the alternative route provided for digitally excluded customers to demonstrate whether they have notified their chargeability to tax.

One-off costs will include familiarisation with the new requirement and could include updating internal processes and creating a government gateway account if the business does not have one already. 

Continuing costs will arise from businesses completing the tax check each time they renew their licence. This includes gathering any necessary information to do this. The tax check will be completed online or via the alternative route provided for digitally excluded customers. 

Section 7 of the Taxes Management Act 1970 requires an individual who is chargeable to tax to notify HMRC within 6 months of the end of the tax year where they have not received a notice to file, or within 30 days of such a notice being withdrawn.

Paragraph 2 of Schedule 18 to Finance Act 1998 requires a company that is chargeable to tax, and which has not received a notice requiring a return, to notify HMRC within 12 months of the end of the accounting period.

Conditionality is designed to test compliance with these two obligations, where they apply.

The licences that will be subject to conditionality are issued under

• section 46 of the Town Police Clauses Act 1847

• section 8 of the Metropolitan Public Carriage Act 1869

• sections 9 and 13 of the Plymouth City Council Act 1975

• sections 51 and 55 of the Local Government (Miscellaneous Provisions) Act 1976

• sections 3 and 13 of the Private Hire Vehicles (London) Act 1998

• section 2 of the Scrap Metal Dealers Act 2013

Section 17(7) of the Transport Act 1985 and paragraph 1 of Schedule 1 to the Scrap Metal Dealers Act 2013 provide safeguards to ensure that, where a renewal application is made before the original licence expires, the original licence continues in force until a final decision has been made on the application, including a decision on appeal (or alternatively, in the case of the Scrap Metal Dealers Act 2013, until the application is withdrawn).

July 2020