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TAX offi cials have drawn up controversial proposals to tackle illegal waste dumping, by linking the awarding of Environment Agency licenses to tax compliance for individuals and companies, writes ADAM BERNSTEIN.
The recent HMRC produced document – entitled ‘Tackling the hidden economy: public sector licensing’ – suggests sole traders and companies who shirk their obligations to pay the right tax could be refused licenses.
The move would be aimed at striking at the hidden economy by connecting licensing to tax compliance, and would specifi cally target the waste sector.
However, one tax specialist believes that if the proposals are implemented, unscrupulous and unlicensed waste operators could be driven further underground – exactly the opposite outcome from the EA’s stated goals.
Jason Piper, Senior Manager, Tax and Business Law at ACCA, one of the UK’s professional accounting bodies, said: “There’s a risk that those who play by the rules and pay their taxes could face the loss of their licence, and livelihood, because of a simple clerical error or technological issue with online services at renewal time - while the cowboys ignore their taxes and the regulations.”
SHOULD the proposals be accepted, HMRC would routinely ask for proof of registration for Income Tax, Corporation Tax, and PAYE when a waste licence was being renewed.
THE results of the consultation are set to be announced later this year, but could lead to dramatic changes in the sector with wide ranging consequences for many individuals and companies where there have been financial issues.
The HMRC proposal, which was published last December, stated that: “applying conditionality to permitting and licensing regimes in the waste management sector could help to strengthen existing regulation, and make it harder for a small number of dishonest businesses to undercut compliant businesses in the sector.”
Support a number of improvements
The consultation document stated tax conditionality: “could also act as a further deterrent to criminal activity in the waste sector, and support a number of improvements to existing regulation in the sector that the government has announced over recent years.”
Tax specialists ACCA are concerned the HMRC proposals could even make life much harder for those who already comply with their obligations, and do little to combat those who fl out regulations.
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ACCA’s Piper said: “It’s adding an extra question into the renewals process, and asking for proof, and that’s going to catch every single responsible trader who is trying to do the right thing already, without making any diff erence to their tax records.
“We need to be sure the measure is proportionate, and will actually help HMRC and the licensing authorities to work together to clamp down on illegal behaviour.”
Waste crime is already a signifi cant problem for the government, and HMRC estimates it costs the UK economy around £604 million a year.
Tax gap estimated at £100 million
HMRC added that the: “impact of waste crime includes environmental damage and also economic damage, including loss to legitimate businesses and loss to the Exchequer through tax evasion. In 2015-16 (the latest year we have data available for) the tax gap for landfill tax was estimated to be £100 million.”
The consultation follows up a paper originally published by HMRC in the summer of 2016, alongside ‘Making Tax Digital’ proposals which sought to make businesses report tax quarterly and online.
The consultation identifi ed a number of sectors, including waste, that it wants to further regulate.
In explaining HMRC’s thinking, the document noted licences have: “existing conditions that align reasonably well with legal obligations to register for and pay tax… including ‘fi t and proper person’ tests which may include assessments of the applicant’s fi nancial integrity.
“Introducing tax registration checks within these licensing schemes would be reasonably compatible with existing rules.”
SHM March, 2018 5
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Personal and business tax could be linked to issuing of waste license
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