It's no secret that HMRC has been clamping down on income tax declarations and late payments to recoup the huge amounts of government spending over the last few years.
We reported way back in December 2010 that HMRC was back in action, refocusing on recovering unpaid taxes and scrutinising potentially incorrect declarations.
The latest group to catch the tax office's eye is taxi drivers, particularly where more and more drivers are becoming self-employed workers and declaring earnings made through ride-hailing apps such as Uber, Ola and Bolt.
HMRC Data Gathering
One of the important aspects for every self-employed taxpayer to be mindful of is that HMRC can collect data from businesses or groups to verify information provided through tax returns.
The regulations allow the tax office to contact taxi companies and request data that they have collected through app-based business models, including:
- Names of drivers
- Payment details
- Accounting records
The current investigation has already found that 4,000 self-employed taxpayers have potentially under-declared their income and will be contacted by HMRC in due course.
Although this represents only around 1.3% of private hire and ride-hailing cabbies, the message is clear: HMRC will take extra steps to try and identify where earning streams or income is undeclared or understated.
Addressing Tax Scrutiny in the Taxi Sector
If a self-employed taxpayer has undeclared income, perhaps from a second job, they are instructed to use the HMRC Disclosure Service to submit the details voluntarily - however, professional financial advice is strongly advisable.
Individuals are also expected to return a signed document reporting their tax position within one month of receiving a notice.
Please note that, if you receive a letter or are advised that your tax affairs are under investigation:
- Individuals are not legally obligated to sign or return the tax position certificate and should only do so after consulting a qualified tax adviser.
- Tax position certificates are not limited to one specific tax period and have no restrictions - they can apply to multiple years.
- False declarations can result in severe consequences.
If you receive an HMRC letter or a request to return a certificate of tax position but believe that your declarations have been correct and complete, it may be worth contacting HMRC directly rather than signing the form.
A response is still required within the 30-day deadline, but you may find that it is advisable to write to HMRC advising that your taxes are up to date.
Additional Tax Checks for Taxi Drivers and Metal Workers
As of the start of the current 2022-23-tax year, HMRC also introduced new tax verification checks before taxi drivers or scrap metal workers can renew a trading licence.
The checks apply across England and Wales and are rolling out to the rest of the UK in 2023.
Part of this process is to make it harder for self-employed workers to avoid registering for income tax declarations or securing a licence without registering as self-employed.
Individuals must use their government gateway credentials to log into the HMRC portal and answer questions about their operating licences.
Tax check questions include verifying your status as self-employed or an employee, whether all income related to the licensed trade has been reported on a tax return, and the date you began trading.
You will also need to provide your UTR and National Insurance number and confirm whether your income from the licensed trade is over £1,000 a year.
Once you have completed the questionnaire, you receive a code that you must include on your renewal application - but the vital factor is that all the information submitted will be cross checked against your past and future tax returns and declared income.
Help With HMRC Tax Investigations
HMRC is clamping down on self-employed sectors where it suspects a high prevalence of individuals earning a second or self-employed income without registering as self-employed or under-declaring their earnings.
If you are concerned about potential tax investigations or have received a letter or notice from HMRC, please contact SAS as soon as possible.
While most queries can be quickly resolved, you must return the required information in good time and bring accounts up to date where necessary to avoid more serious repercussions, penalties and fines.