TAXING MATTERS
WHAT DO THE 4,000 HMRC TAX 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 from the HM Revenue and Customs (HMRC) potentially asking for more money.
You may have read recently about the 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 an HMRC fishing exercise?
“The letters ask the taxi driver to either confirm they need to declare more income or confirm the income information provided to HMRC was correct”.
Well, the simple answer is that only the HMRC currently knows why. With MTD on the way, the HMRC seems to be practising 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 implementing 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 a letter
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Although this is not the same, anyone who has been the subject of an 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, the 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, coupled 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 the 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 whom they will be writing to are already ‘in discussions with’ the tax man either by choice or in enquiry.
Our simple advice is: it’s here, so get advice from a professional. Many drivers already have an accountant who would have received a copy of the letter and be dealing with it on their behalf. Remember, this letter also refers directly to the tax checks and relicensing, so they know the net is closing in.
Conclusion
Although the licensed taxi drivers are being hit first, (mainly because of the tax checks I presume), the data reporting rules for the platforms mean that eventually in our increasingly cashless society there will be nowhere to hide from the taxman.
Get advice from a tax professional now.
Eazitax: the industry’s leading accountancy firm for sole trader tax returns and company accounts
eazitax.co.uk 020 8529 2600
OCTOBER 2022 PHTM
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