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PHV TAX CHECKS: What do the 4,000 HMRC letters actually mean?
Things are tough financially in the UK at the moment with the rising cost of living, and everyone talking about an impending recession, so it may well be a difficult time to receive a letter potentially asking for more money.
You may have read recently about HM Revenue and Customs (HMRC) writing to around 4,000 taxi and private hire drivers using booking apps. Everyone seems to have a different theory about what it means:
Is it because of the online declarations for the tax checks?
Is it because a tech company is handing driver information over?
Or is it just a HMRC phishing exercise?
Well, the simple answer is that only the HMRC currently knows why. With Making Tax Digital (MTD) on the way, the HMRC seem to be practicing flexing their data capture muscles. In the early stages of the Tax Check consultations, it was intimated by HMRC that the data collected from drivers would be ‘blind data’. Meaning that the declarations would not necessarily be used directly against an individual, but this was never formally confirmed.
Perhaps more importantly the Government published a response in August this year from their 2021 consultation ‘Reporting Rules for Digital Platforms’ which considered the implementation of the new rules. Interestingly the list of ‘Stakeholders’ includes Deliveroo, Just Eat and Uber.
Under the rules, from January 2024, tech companies not just, but including, passenger, food and parcel transport apps will be required to report details, including the income, of their users to the tax authority of the jurisdiction in which the platform is resident. So, there is an element of inevitability about this anyway.
So, let’s look at the actual wording and see what it means for drivers who have received it.
Although this is not the same, anyone who has been the subject of a HMRC enquiry, will know that HMRC has the right to open an enquiry into any tax return. It is also clear that any self- employed taxpayer needs to keep all the documents and information used to prepare a tax return. If looked at in that light, the task is not a huge one.
However, these letters expressly say that: “We have information that shows you’ve earned money (income) from driving customers who booked using online applications. We also have information that shows that you have not told us about some or all of this income.”
This is unusually specific for a first letter, allayed with the fact that the driver will only have 90 days from the date of the letter to work out and pay any tax. It then goes on to offer a ‘voluntary disclosure’.
Even though this does seem unusually specific, it also says that HMRC does have some wiggle room for their details to not be correct. As they say, tax can be complicated, so they want to help you get it right! It is also possible that many of the people that they will be writing to are already ‘in discussions’ with the tax man either by choice, or in enquiry.
Our simple advice, it’s here so get advice from a professional. Many drivers will already have an accountant who would have received a copy of the letter and be dealing with it on their behalf already. Remember, this letter also refers directly to the tax checks and relicensing, so they know the net is closing in.
In conclusion, although the licensed taxi drivers are being hit first (mainly because to the tax checks I presume), the data reporting rules for the platforms means that eventually in our increasingly cashless society there will be nowhere to hide from the taxman. Get advice from a tax professional now.
