TAX CHECKS: HMRC to send out 4,000 letters to PHV drivers targeting tax owed

Circle image credit: HMRC

HM Revenue & Customs (HMRC) are writing to as many as 4,000 private hire vehicle (PHV) drivers in a bid to claim back unpaid tax owed.

This year HMRC introduced new tax checks that must be completed when taxi and PHV drivers renew their licences in England and Wales.

The new checks, which went live on 4 April 2022, do not include any tax calculations, but simply confirm whether a driver is registered for tax on their licensed taxi or private hire vehicle income. Drivers in Scotland and Northern Ireland will have to go through the same new licensing checks from April 2023.

Astonishingly, HMRC have unearthed THOUSANDS of PHV drivers who are not registered with the tax authority, but who are operating via booking apps such as Uber, Bolt and Ola.

According to Steve McNamara, General Secretary Licensed Taxi Drivers’ Association (LTDA), the majority of those under review are PHV drivers from big cities with high numbers of licensees. According to the latest Transport for London (TfL) statistics, there are currently over 96,000 PHV drivers in the capital. They form part of the 330,300 licensed taxi and PHV drivers in England and Wales who ALL must go through the new licensing renewal process if they wish to stay in the industry.

A taxi and PHV licence in London lasts for three years, and this time period is similar for other licensing authorities, which potentially means THOUSANDS more drivers could face action in the coming years.

According to the Financial Times (FT), HMRC said the lost tax originates from PHV drivers working on booking apps, and were not traditional black taxi drivers.

HMRC confirmed in a statement to the FT that the letters were “being sent to people who have earned money from driving customers who booked private hire cars through online driving applications”.

What is a ‘tax check’?

A tax check confirms that you’re registered for tax, if necessary. It will ask questions about how you pay any tax that may be due on income you earn from your licensed trade.

You must carry out the tax check yourself. You cannot ask a tax agent or adviser to do this on your behalf.

After you complete the tax check you’ll be given a 9-character code. This is your tax check code. You must give it to the licensing authority with your licence application — they will not be able to process your application without it.

Tax check codes expire after 120 days, so if you make a licence application for another licence after that time, you’ll need to carry out a new tax check for it.

If you’re a partner making a licence application on behalf of a partnership you must complete a tax check for yourself. Your licensing authority will tell you if any other partners also need to complete a tax check.

Your licensing authority will need your tax check code before they can consider your licence application.

Who must complete a tax check and why?

You will need to complete the tax check when you renew your licence as a:

• Driver of a taxi (hackney carriage)

• Driver of a private hire vehicle (and dual licences)

• Private hire vehicle operator

• Scrap metal dealer mobile collector

• Scrap metal dealer site.

HMRC worked closely with sector representatives and licensing bodies to communicate the changes leading up to April 2022 and to support those who might be affected.

In January 2022, HMRC published full guidance on GOV.UK to help licensees and licensing bodiesprepare for the new tax checks that will be introduced in Schedule 33 of Finance Act 2021. 

If you should have been registered to pay tax and have not been, HMRC will work with drivers to get them back on the right track. It’s your responsibility to get your tax right, but HMRC is there to help.

The new checks are said to be about creating a level playing field for the compliant majority in these sectors, so the majority who do play by the rules won’t be disadvantaged by the minority who do not.  

Getting a new licence: If you are applying for a licence for the first time, you will not need to complete the tax check. However, licensing bodies will direct you to HMRC guidance about your tax responsibilities and ask you to confirm that you are aware of this guidance.

Renewing a licence: From 4 April 2022, if you renew or apply for a subsequent licence under a different licensing body, you’ll have to do a tax check. You’ll be able to do this online through the new tax check digital service – when it goes live in early March.

Licensing bodies will send out clear guidance to licence holders ahead of their renewal date. HMRC has worked closely with licensing bodies, the taxi/private hire sector and their representative bodies to ensure they have the guidance and tools needed to prepare applicants for these changes, including materials translated into different languages.