The Government is planning to introduce a ‘tax registration check’ linked to licence renewal application processes in the public sector to make it difficult for individuals to operate in the hidden economy.

HMRC will introduce legislation applying conditionality in the taxis and private hire vehicles (PHVs) sector, the waste sector and the scrap metal trade.

HMRC is planning to carry out these tax registration checks by developing a digital service which would allow applicants to demonstrate their tax-registration status to a licensing authority.

 One option would be for applicants to generate evidence through their digital tax account and transfer it securely to a licensing authority. The government believes this would also ensure simplicity for licensing authorities and reduce the need for HMRC to obtain data from licensing authorities to check evidence provided by applicants.

The following rules will apply when carrying out these tax checks:

1.    New applicants should be signposted towards tax obligations and HMRC services but no firm checks should be needed, as people applying for licences for the first time may not have been trading long enough to be required to register for tax;

 2.   Tax-registration checks should apply to those renewing licences, as returning applicants are likely to have been trading long enough to be obligated to register for tax;

3.Tax registration checks should require applicants to submit appropriate proof that they are registered for tax, or to declare that they do not need to be registered;

 4.   There should be no requirement upon licensing authorities to carry out more detailed tax checks when licence renewals take place, beyond confirming the tax-registration status of an applicant.

The hidden economy refers to individuals and businesses with sources of taxable activity that are hidden from HMRC. The hidden economy tax gap is estimated at £3.2 billion for 2016-17.

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