Legislation in the Finance Bill 2020-21 will introduce new measures requiring a tax check for applications to renew licences for:
The measures will be implemented from April 2022 and are intended to make it more difficult for non-compliant traders to operate in the hidden economy and help level the playing field for the compliant majority.
The government says it is considering extending this reform to Scotland and Northern Ireland in the future and will work will the devolved administrations to this effect.
Licensing bodies will be required to signpost first-time applicants to HMRC guidance about their potential tax obligations and obtain confirmation that the applicant is aware of the guidance before considering the application. Where the application is not a first-time application (a renewed application) the licensing body must, before considering the application, obtain confirmation from HMRC that the applicant has completed a tax check.
An applicant will carry out a tax check by providing information to enable HMRC to satisfy itself that the applicant has complied with an obligation to notify their chargeability to tax, where such an obligation applied. The check will be completed when HMRC is satisfied the applicant has provided all information requested.
Where a HMRC failure prevents the licensing body from meeting its requirement to obtain confirmation of the completion of a tax check, that requirement will cease to apply. HMRC will also have discretion to waive the requirement where an HMRC failure prevented the applicant completing their tax check.
In cases where the licensing body has been unable to obtain confirmation of completion of the tax check for 28 days other than because of an HMRC failure (for example, where an applicant refuses to complete a tax check and therefore HMRC cannot provide confirmation that they have completed one) amendments to section 17 of the Transport Act 1985 and paragraph 1 of Schedule 1 to the Scrap Metal Dealers Act 2013 will cause the extended licence to expire.
The draft primary legislation for this measure has been published for technical consultation alongside supporting documents. This is in line with the government’s tax consultation framework, under which draft clauses for a Finance Bill are generally published for scrutiny at least 3 months before the Bill is introduced to Parliament.
The technical consultation for hidden economy conditionality will run until 15th September 2020.The documents published are intended to help both applicants and licensing bodies in England and Wales understand how the new tax check will affect them. Prior to this change taking effect in April 2022, full guidance to support applicants and licensing bodies will be published on gov.uk.
The draft legislation and supporting documents are available online.